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Inflation variability between central bank's preferences and the structure of the economy: A note

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  • Sweidan, Osama D.

Abstract

The current paper seeks to build a theoretical explanation to understand why many central banks failed to reduce inflation variability despite having the desire. The result proves that central bank's preferences are a necessary condition but not sufficient to guarantee lower inflation variability. The structure of the economy and the types of the shocks are significant factors.

Suggested Citation

  • Sweidan, Osama D., 2011. "Inflation variability between central bank's preferences and the structure of the economy: A note," Economic Modelling, Elsevier, vol. 28(1), pages 630-636.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:1:p:630-636
    DOI: 10.1016/j.econmod.2010.06.008
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    More about this item

    Keywords

    Inflation variability; Quadratic loss function; Asymmetric loss function; Central banks;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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