Nonlinear Monetary Policy Rules: Some New Evidence for the U.S

Juan Dolado, Ramón María-Dolores Pedrero, Francisco J. Ruge-Murcia
2004 Studies in Nonlinear Dynamics & Econometrics  
This paper dreives 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 nonlinear. Analytical results show that these features lead to sign and size aymmetries, and nonlinearities in the policy rule. Reduced-form estimates indicate that US monetary policy can be characterized by a nonlinear policy rule after 1983, but not before 1979. This finding is consistent with
more » ... 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.
doi:10.2202/1558-3708.1155 fatcat:zh7yxmzdofbtdgrte5nlcofzja