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Monetary policy loss functions: two cheers for the quadratic

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  • Jagjit Chadha
  • Philip Schellekens

Abstract

The implications for optimal monetary policy of relaxing the normal assumption of a quadratic loss function are examined. Several alternative specifications are considered, but the results suggest that the convenient assumption of quadratic losses may not be that drastic.

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Paper provided by Bank of England in its series Bank of England working papers with number 101.

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Date of creation: Sep 1999
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Handle: RePEc:boe:boeewp:101

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  1. repec:cup:etheor:v:13:y:1997:i:6:p:808-17 is not listed on IDEAS
  2. Robert J. Shiller, 1998. "Human Behavior and the Efficiency of the Financial System," Cowles Foundation Discussion Papers 1172, Cowles Foundation for Research in Economics, Yale University.
  3. James Tobin, 1989. "On the Theory of Macroeconomic Policy," Cowles Foundation Discussion Papers 931, Cowles Foundation for Research in Economics, Yale University.
  4. Peter F. Christoffersen & Francis X. Diebold, 1997. "Optimal prediction under asymmetric loss," Working Papers 97-11, Federal Reserve Bank of Philadelphia.
  5. Svensson, Lars E O, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," CEPR Discussion Papers 1511, C.E.P.R. Discussion Papers.
  6. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, Octomber.
  7. Horowitz, Ann R., 1987. "Loss functions and public policy," Journal of Macroeconomics, Elsevier, vol. 9(4), pages 489-504.
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Cited by:
  1. Paolo Surico, 2004. "Inflation Targeting and Nonlinear Policy Rules: the Case of Asymmetric Preferences," Econometric Society 2004 Latin American Meetings 8, Econometric Society.
  2. Paolo Surico, 2004. "Inflation Targeting and Nonlinear Policy Rules: The Case of Asymmetric Preferences (new title: The Fed's monetary policy rule and U.S. inflation: The case of asymmetric preferences)," CESifo Working Paper Series 1280, CESifo Group Munich.
  3. Mayer, Eric, 2003. "The mechanics of a reasonably fitted quarterly New Keynesian macro model," W.E.P. - Würzburg Economic Papers 41, University of Würzburg, Chair for Monetary Policy and International Economics.
  4. Tena, Juan de Dios & Tremayne, A.R., 2009. "Modelling monetary transmission in UK manufacturing industry," Economic Modelling, Elsevier, vol. 26(5), pages 1053-1066, September.
  5. Simon Hall & Chris Salmon & Tony Yates & Nicoletta Batini, 1999. "Uncertainty and Simple Monetary Policy Rules - An illustration for the United Kingdom," Bank of England working papers 96, Bank of England.
  6. Corrado, L. & Holly, S., 2000. "Piecewise Linear Feedback Rules in a Non Linear Model of the Phillips Curve: Evidence from the US and the UK," Cambridge Working Papers in Economics 0019, Faculty of Economics, University of Cambridge.
  7. Mirco Soffritti & Francesco Zanetti, 2008. "The advantage of tying one's hands: revisited," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 135-149.
  8. Luisa Corrado & Sean Holly, 2003. "Nonlinear Phillips Curves, Mixing Feedback Rules and the Distribution of Inflation and Output," CEIS Research Paper 37, Tor Vergata University, CEIS.
  9. Xavier Debrun, 2000. "Fiscal Rules in a Monetary Union: A Short-Run Analysis," Open Economies Review, Springer, vol. 11(4), pages 323-358, October.
  10. Özer Karagedikli & Kirdan Lees, 2004. "Do inflation targeting central banks behave asymmetrically? Evidence from Australia and New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP 2004/02, Reserve Bank of New Zealand.
  11. Osama D. Sweidan, 2009. "Asymmetric central bank's preference and inflation rate in Jordan," Studies in Economics and Finance, Emerald Group Publishing, vol. 26(4), pages 232-245, October.
  12. Simone Casellina & Mariacristina Uberti, 2008. "Optimal Monetary Policy and Long-term Interest Rate Dynamics: Taylor Rule Extensions," Computational Economics, Society for Computational Economics, vol. 32(1), pages 183-198, September.
  13. Hyeon-seung Huh & Hyun Lee & Namkyung Lee, 2009. "Nonlinear Phillips curve, NAIRU and monetary policy rules," Empirical Economics, Springer, vol. 37(1), pages 131-151, September.

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