The Macroeconomic Loss Function: A Critical Note
AbstractThe standard loss function gives the same weight to positive and negative deviations from the output and inflation targets. This short note criticizes this symmetry assumption. If the period covered is long enough output growth in excess of the target, and often also inflation rates that are below target, should be counted as gains instead of losses.
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Bibliographic InfoPaper provided by University of California at Davis, Department of Economics in its series Working Papers with number 02-2.
Date of creation: 2002
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Other versions of this item:
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
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- Horowitz, Ann R., 1987. "Loss functions and public policy," Journal of Macroeconomics, Elsevier, vol. 9(4), pages 489-504.
- Cecchetti, Stephen G, 2000. "Making Monetary Policy: Objectives and Rules," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 43-59, Winter.
- Efrem Castelnuovo, 2003. "Taylor Rules and Interest Rate Smoothing in the US and EMU," Macroeconomics 0303002, EconWPA.
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