Monetary Policy Dynamics in the United States

The recognised approach to designing an optimal monetary policy model is based on the central bank’s ability to mitigate losses using a quadratic criterion subject to the linear structure of the economy. This study examines the United States Federal Reserve’s (Fed) monetary policy in different econo...

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Autores principales:	Shodipe Oladimeji T., Shobande Olatunji Abdul
Formato:	article
Lenguaje:	EN
Publicado:	De Gruyter 2021
Materias:	monetary policy asymmetric preference taylor rule structural breaks united states e32 e45 e52 e58 Economics as a science HB71-74
Acceso en línea:	https://doaj.org/article/df92de95e7494037a3819554a027fe90
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id	oai:doaj.org-article:df92de95e7494037a3819554a027fe90
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spelling	oai:doaj.org-article:df92de95e7494037a3819554a027fe902021-12-05T14:11:00ZMonetary Policy Dynamics in the United States2451-345810.1515/openec-2020-0111https://doaj.org/article/df92de95e7494037a3819554a027fe902021-05-01T00:00:00Zhttps://doi.org/10.1515/openec-2020-0111https://doaj.org/toc/2451-3458The recognised approach to designing an optimal monetary policy model is based on the central bank’s ability to mitigate losses using a quadratic criterion subject to the linear structure of the economy. This study examines the United States Federal Reserve’s (Fed) monetary policy in different economic environments. It provides an empirical solution to the central bank’s optimisation problem when preferences are asymmetric in both in˛ation and output gaps. The study tested for structural breaks and uncovered potential evidence of nonlinearities in the Fed’s reaction function, which provides more information on policy objective. The empirical evidence suggests that the Fed’s policy rate differs in these periods. This strongly indicates the presence of asymmetry. Further evidence suggests that the predictive power of the estimated model increases when a smoothing process is allowed.Shodipe Oladimeji T.Shobande Olatunji AbdulDe Gruyterarticlemonetary policyasymmetric preferencetaylor rulestructural breaksunited statese32e45e52e58Economics as a scienceHB71-74ENOpen Economics, Vol 4, Iss 1, Pp 14-30 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	monetary policy asymmetric preference taylor rule structural breaks united states e32 e45 e52 e58 Economics as a science HB71-74
spellingShingle	monetary policy asymmetric preference taylor rule structural breaks united states e32 e45 e52 e58 Economics as a science HB71-74 Shodipe Oladimeji T. Shobande Olatunji Abdul Monetary Policy Dynamics in the United States
description	The recognised approach to designing an optimal monetary policy model is based on the central bank’s ability to mitigate losses using a quadratic criterion subject to the linear structure of the economy. This study examines the United States Federal Reserve’s (Fed) monetary policy in different economic environments. It provides an empirical solution to the central bank’s optimisation problem when preferences are asymmetric in both in˛ation and output gaps. The study tested for structural breaks and uncovered potential evidence of nonlinearities in the Fed’s reaction function, which provides more information on policy objective. The empirical evidence suggests that the Fed’s policy rate differs in these periods. This strongly indicates the presence of asymmetry. Further evidence suggests that the predictive power of the estimated model increases when a smoothing process is allowed.
format	article
author	Shodipe Oladimeji T. Shobande Olatunji Abdul
author_facet	Shodipe Oladimeji T. Shobande Olatunji Abdul
author_sort	Shodipe Oladimeji T.
title	Monetary Policy Dynamics in the United States
title_short	Monetary Policy Dynamics in the United States
title_full	Monetary Policy Dynamics in the United States
title_fullStr	Monetary Policy Dynamics in the United States
title_full_unstemmed	Monetary Policy Dynamics in the United States
title_sort	monetary policy dynamics in the united states
publisher	De Gruyter
publishDate	2021
url	https://doaj.org/article/df92de95e7494037a3819554a027fe90
work_keys_str_mv	AT shodipeoladimejit monetarypolicydynamicsintheunitedstates AT shobandeolatunjiabdul monetarypolicydynamicsintheunitedstates
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Monetary Policy Dynamics in the United States

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