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Non-Linear Monetary Policy Rules: Some New Evidence for the US

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Listed:
  • Dolado, Juan J.
  • María-Dolores, Ramón
  • Ruge-Murcia, Francisco J.

Abstract

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 non-linear. Analytical results show that these features lead to sign and size asymmetries, and non-linearities in the policy rule. Reduced-form estimates indicate that US monetary policy can be characterized by a non-linear 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.

Suggested Citation

  • Dolado, Juan J. & María-Dolores, Ramón & Ruge-Murcia, Francisco J., 2002. "Non-Linear Monetary Policy Rules: Some New Evidence for the US," CEPR Discussion Papers 3405, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3405
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    More about this item

    Keywords

    asymmetric preferences; inflation targets; monetary policy; non-linear Phillips curve; non-linear Taylor rules;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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