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Nonlinear Monetary Policy Rules: Some New Evidence for the U.S

  • Dolado Juan


    (Universidad Carlos III)

  • Pedrero Ramón María-Dolores


    (Universidad de Murcia)

  • Ruge-Murcia Francisco J.


    (University of Montreal)

This paper derives optimal monetary policy rules in setups where certainty equivalence does not hold because either central bank preferences are not quadratic, and/or the aggregate supply relation is nonlinear. Analytical results show that these features lead to sign and size asymmetries, and nonlinearities in the policy rule. Reduced-form estimates indicate that US monetary policy can be characterized by a nonlinear policy rule after 1983, but not before 1979. This finding is consistent with the view that the Fed's inflation preferences during the Volcker-Greenspan regime differ considerably from the ones during the Burns-Miller regime.

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Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 8 (2004)
Issue (Month): 3 (September)
Pages: 1-34

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Handle: RePEc:bpj:sndecm:v:8:y:2004:i:3:n:2
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