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Asymmetric Preferences For Interest Rate Variability And Non‐Linear Monetary Policy Inertia

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  • Anna Florio

Abstract

Introducing in a central bank loss function asymmetric preferences for interest rate stabilization together with a (symmetric) smoothing goal could lead to asymmetric interest rate smoothing. An empirical analysis supports this theoretical result and finds for the disinflation (Volcker) period a more cautious adjustment of interest rates downwards than upwards, and for the ‘price stability’ (Greenspan) period a more inertial behaviour in the opposite direction.

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  • Anna Florio, 2009. "Asymmetric Preferences For Interest Rate Variability And Non‐Linear Monetary Policy Inertia," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(5), pages 685-704, November.
    • Handle: RePEc:bla:scotjp:v:56:y:2009:i:5:p:685-704
    DOI: 10.1111/j.1467-9485.2009.00503.x
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    References listed on IDEAS

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    Cited by:

    1. Anna Florio, 2020. "Term structure and interest rate stabilization policies in the Greenspan era," Empirical Economics, Springer, vol. 59(1), pages 345-355, July.

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