The Macroeconomic Loss Function: A Critical Note
The 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.
|Date of creation:||16 Jan 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (530) 752-0741
Fax: (530) 752-9382
Web page: http://www.econ.ucdavis.edu
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Roger N. Waud, 1975.
"Asymmetric policymaker utility functions and optimal policy under uncertainty,"
Special Studies Papers
57, Board of Governors of the Federal Reserve System (U.S.).
- Waud, Roger N, 1976. "Asymmetric Policymaker Utility Functions and Optimal Policy Under Uncertainty," Econometrica, Econometric Society, vol. 44(1), pages 53-66, January.
- Horowitz, Ann R., 1987. "Loss functions and public policy," Journal of Macroeconomics, Elsevier, vol. 9(4), pages 489-504.
When requesting a correction, please mention this item's handle: RePEc:cda:wpaper:02-2. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Scott Dyer)
If references are entirely missing, you can add them using this form.