Tracking a central banker's preference: A nonparametric regression approach

Cheolbeom Park; Sookyung Park

doi:10.1111/boer.12288

Tracking a central banker's preference: A nonparametric regression approach

Cheolbeom Park, Sookyung Park

Department of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We examine how the Fed's preference influences the behavior of inflation rate and unemployment rate using US data over the period of 1960–2017. After showing instability in a constant-coefficient regression, we run a nonparametric regression, and find that the Fed's preference parameters have moved, implying that its preference can be represented by the asymmetric preference model putting more weights on high unemployment rate approximately before the era of Volcker's chairmanship and by the inflation targeting model during the 1980s and 1990s. The Fed's preferences again seem concerned about higher unemployment after the Global Financial Crisis.

Original language	English
Journal	Bulletin of Economic Research
DOIs	https://doi.org/10.1111/boer.12288
Publication status	Accepted/In press - 2021

Keywords

asymmetric preference
inflation
monetary policy
nonparametric regression
time-varying parameter
unemployment

ASJC Scopus subject areas

Economics and Econometrics

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1111/boer.12288

Cite this

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title = "Tracking a central banker's preference: A nonparametric regression approach",

abstract = "We examine how the Fed's preference influences the behavior of inflation rate and unemployment rate using US data over the period of 1960–2017. After showing instability in a constant-coefficient regression, we run a nonparametric regression, and find that the Fed's preference parameters have moved, implying that its preference can be represented by the asymmetric preference model putting more weights on high unemployment rate approximately before the era of Volcker's chairmanship and by the inflation targeting model during the 1980s and 1990s. The Fed's preferences again seem concerned about higher unemployment after the Global Financial Crisis.",

keywords = "asymmetric preference, inflation, monetary policy, nonparametric regression, time-varying parameter, unemployment",

author = "Cheolbeom Park and Sookyung Park",

note = "Funding Information: We thank the Editor, the Associate Editor, and anonymous referees for valuable comments. We are also grateful to conference participants at the 2016 Korea International Economic Association's Annual Meeting, the 2017 Korea Allied Economic Association's Annual Meeting, and the 2017 Korea Money & Finance Association Annual Meeting for helpful discussions and comments. All remaining errors are ours. Sookyung Park acknowledges that this work was supported by a Korea University Grant. Publisher Copyright: {\textcopyright} 2021 Board of Trustees of the Bulletin of Economic Research and John Wiley & Sons Ltd",

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doi = "10.1111/boer.12288",

language = "English",

journal = "Bulletin of Economic Research",

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PY - 2021

Y1 - 2021

N2 - We examine how the Fed's preference influences the behavior of inflation rate and unemployment rate using US data over the period of 1960–2017. After showing instability in a constant-coefficient regression, we run a nonparametric regression, and find that the Fed's preference parameters have moved, implying that its preference can be represented by the asymmetric preference model putting more weights on high unemployment rate approximately before the era of Volcker's chairmanship and by the inflation targeting model during the 1980s and 1990s. The Fed's preferences again seem concerned about higher unemployment after the Global Financial Crisis.

AB - We examine how the Fed's preference influences the behavior of inflation rate and unemployment rate using US data over the period of 1960–2017. After showing instability in a constant-coefficient regression, we run a nonparametric regression, and find that the Fed's preference parameters have moved, implying that its preference can be represented by the asymmetric preference model putting more weights on high unemployment rate approximately before the era of Volcker's chairmanship and by the inflation targeting model during the 1980s and 1990s. The Fed's preferences again seem concerned about higher unemployment after the Global Financial Crisis.

KW - asymmetric preference

KW - inflation

KW - monetary policy

KW - nonparametric regression

KW - time-varying parameter

KW - unemployment

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ER -

Tracking a central banker's preference: A nonparametric regression approach

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

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