DP2441 Asymmetries In Monetary Policy Rules: Evidence For Four Central Banks

Author(s): Juan J. Dolado, Ramón María-Dolores, Manuel Naveira Barrero
Publication Date: April 2000
Keyword(s): asymmetries, Ordered Probit Models, Taylor Rules
JEL(s): E52, E58
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2441

This paper investigates the possible existence of asymmetric effects in the response of four central banks to inflation and output gaps as regards the 'sign' and 'size' of those gaps. The evidence obtained both through the estimation of a generalized Taylor rule and an ordered probit model points out that most central banks show a stronger reaction to inflation upswings relative to downswings. However, except for the Federal Reserve, no asymmetric behaviour with respect to the output gap is found.