Rights statement: This is the author’s version of a work that was accepted for publication in European Economic Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Economic Review, 140, 2021 DOI: 10.1016/j.euroecorev.2021.103945
Accepted author manuscript, 619 KB, PDF document
Available under license: CC BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License
Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Asymmetries in Monetary Policy
AU - Benigno, Pierpaolo
AU - Rossi, Lorenza
N1 - This is the author’s version of a work that was accepted for publication in European Economic Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Economic Review, 140, 2021 DOI: 10.1016/j.euroecorev.2021.103945
PY - 2021/11/30
Y1 - 2021/11/30
N2 - Nonlinearities embedded in the standard New-Keynesian model show that a welfare maximizing policymaker should behave in line with a contractionary bias, fearing more expansions in output and inflation rather than contractions. On the contrary, the aggregate-supply equation implies that any upward pressure coming from real marginal costs does not necessarily push up inflation. Once these two forces are combined in the optimal policy, an overall expansionary bias emerges. The nonlinearities of the AS equation combined with changes in volatility can be responsible for a flattening in the estimated linear Phillips curve.
AB - Nonlinearities embedded in the standard New-Keynesian model show that a welfare maximizing policymaker should behave in line with a contractionary bias, fearing more expansions in output and inflation rather than contractions. On the contrary, the aggregate-supply equation implies that any upward pressure coming from real marginal costs does not necessarily push up inflation. Once these two forces are combined in the optimal policy, an overall expansionary bias emerges. The nonlinearities of the AS equation combined with changes in volatility can be responsible for a flattening in the estimated linear Phillips curve.
KW - ASYMMETRIES
KW - MONETARY
KW - POLICY
KW - INFLATION
KW - BIAS
U2 - 10.1016/j.euroecorev.2021.103945
DO - 10.1016/j.euroecorev.2021.103945
M3 - Journal article
VL - 140
JO - European Economic Review
JF - European Economic Review
SN - 0014-2921
M1 - 103945
ER -