Download now Free registration required
The paper considers asymmetric central bank preferences and nonlinear AS curve in the monetary policy reaction function to examine nonlinear property of monetary policy rules. The optimal monetary policy rules are derived in a new Keynesian macroeconomic framework where the central bank has the asymmetric objective function. The derived reaction function explains the nonlinear reaction to the inflation gap and the output gap. The nonlinear reaction function is applied to explain the determination of the interest rate in Korea for the sample period of inflation targeting September 1998 to December 2005.
- Format: PDF
- Size: 200.5 KB