Uncovering Policy Makers' Loss Function
AbstractThe quadratic form of policy makers' loss function has gained a wide consensus in monetary policy analysis mainly because of its analytical tractability. A number of researchers, however, have recently proposed alternative functional forms which have also proved to yield tractable solutions of the central bank optimization problem. Using a nonparametric specification of the output gap argument into the loss function, this paper attempts to discriminate among three classes of proposals through the evidence drawn upon the form of the US efficient policy frontier.
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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0210003.
Length: 9 pages
Date of creation: 16 Oct 2002
Date of revision:
Note: Type of Document - tex; prepared on pc; to print on hp; pages: 9; figures: included
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nonquadratic loss function; efficient policy frontier; kernel regression;
Find related papers by JEL classification:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-10-23 (All new papers)
- NEP-MON-2002-10-23 (Monetary Economics)
- NEP-POL-2002-10-23 (Positive Political Economics)
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