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Reading a central banker's preference: A non parametric regression approach

Author

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  • Cheolbeom Park

    (Department of Economics, Korea University, 145 Anamro, Seongbukgu, Seoul, Korea 02841)

  • Sookyung Park

    (Institute of Economic Research, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul, 08826, Republic of Korea)

Abstract

We examine the role of the Fed's preference in the understanding of inflation rate and unemployment rate evolution using US data over the period of 1960-2017. Facing the evidence of instability in a constant-coefficient regression, we run a nonparametric regression, and find that the Fed's preference parameters have moved, implying that its preference can be represented by the asymmetric preference model putting more weights on high unemployment rate approximately before the era of Volcker's chairmanship and by the inflation targeting model during the 1980s and 1990s. The Fed's preferences again seem concerned about higher unemployment after the Global Financial Crisis.

Suggested Citation

  • Cheolbeom Park & Sookyung Park, 2020. "Reading a central banker's preference: A non parametric regression approach," Discussion Paper Series 2007, Institute of Economic Research, Korea University.
    • Handle: RePEc:iek:wpaper:2007
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    More about this item

    Keywords

    asymmetric preference; inflation; monetary policy; time-varying parameter; unemployment; nonparametric regression;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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