Discussion Paper Details

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Title: Recession Aversion, Output and the Kydland-Prescott Barro-Gordon Model

Author(s): Stefan Gerlach

Publication Date: January 2003

Keyword(s): asymmetric policy reactions, inflation bias and reaction functions

Programme Area(s): International Macroeconomics

Abstract: This Paper explores the relationship between the Kydland-Prescott Barro-Gordon model and models with asymmetric policy preferences. While both yield an inflation bias, recession aversion dampens the output effects of contractionary supply shocks. Some inflation may therefore reflect policy preferences.

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Bibliographic Reference

Gerlach, S. 2003. 'Recession Aversion, Output and the Kydland-Prescott Barro-Gordon Model'. London, Centre for Economic Policy Research.