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The Nonlinear Phillips Curve and Inflation Forecast Targeting - Symmetric Versus Asymmetric Monetary Policy Rules
Schaling,E.
Schaling,E.
Abstract
We extend the Svensson (1997a) inflation forecast targeting framework with a convex Phillips curve. We derive an asymmetric target rule, that implies a higher level of nominal interest rates than the Svensson (1997a) forward looking version of the reaction function popularised by Taylor (1993). Extending the analysis with uncertainty about the output gap, we find that uncertainty induces a further upward bias in nominal interest rates. Thus, the implications of uncertainty for optimal policy are the opposite of standard multiplier uncertainty analysis.
Description
Pagination: 27
Date
1998
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Publisher
Macroeconomics
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136.pdf
Adobe PDF, 120.16 KB
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Keywords
inflation targets, nonlinearities, asymmetries, stochastic control, E31 - Price Level ; Inflation ; Deflation, E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems, E52 - Monetary Policy, E58 - Central Banks and Their Policies, SDG 17 - Partnerships for the Goals
Citation
Schaling, E 1998 'The Nonlinear Phillips Curve and Inflation Forecast Targeting - Symmetric Versus Asymmetric Monetary Policy Rules' CentER Discussion Paper, vol. 1998-136, Macroeconomics, Tilburg.