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The central bank inflation bias in the presence of asymmetric preferences and non-normal shocks

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<mark>Journal publication date</mark>2009
<mark>Journal</mark>Economics Bulletin
Issue number3
Volume29
Number of pages13
Pages (from-to)1608-1620
Publication StatusPublished
<mark>Original language</mark>English

Abstract

We investigate the nature of the inflation bias in a model that exhibits asymmetries in preferences and non–normality in shocks but simplifies to the classic Barro-Gordon problem as a special case. The inflation bias is shown to depend on the trade-off between preference, structural and the scale and shape parameters of the model.