Discussion paper

DP3405 Non-Linear Monetary Policy Rules: Some New Evidence for the US

This Paper derives optimal monetary policy rules in setups where certainty equivalence does not hold because either central bank preferences are not quadratic, and/or the aggregate supply relation is non-linear. Analytical results show that these features lead to sign and size asymmetries, and non-linearities in the policy rule. Reduced-form estimates indicate that US monetary policy can be characterized by a non-linear policy rule after 1983, but not before 1979. This finding is consistent with the view that the Fed?s inflation preferences during the Volcker-Greenspan regime differ considerably from the ones during the Burns-Miller regime.

£6.00
Citation

Dolado, J, R María-Dolores and F Ruge-Murcia (eds) (2002), “DP3405 Non-Linear Monetary Policy Rules: Some New Evidence for the US”, CEPR Press Discussion Paper No. 3405. https://cepr.org/publications/dp3405