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| Author: | Tambakis, D. N. |
| Title: | Expected Social Welfare Under a Convex Phillips Curve and Asymmetric Policy Preferences |
| Journal: | Journal of Money, Credit and Banking
2002 : MAY, VOL. 34:2, p. 434-449 |
| Index terms: | MONETARY POLICY SOCIAL WELFARE ANALYTICAL REVIEW ESTIMATION |
| Language: | eng |
| Abstract: | This paper evaluates the expected social welfare implications of monetary policy with a convex Phillips curve under a symmetric loss function and an asymmetric loss function corresponding to the "opportunistic approach" to disinflation. The convex-asymmetric specification yields an inaction range of inflation shocks for which the optimal monetary policy setting does not adjust. For parameter estimates relevant to the United States, numerical simulations show that the symmetric loss function dominates the asymmetric alternative in expected social welfare terms. Asymmetric policy preferences enhance social welfare only under extreme parameter values. |
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