This paper analyses the impact of asymmetric preferences with respect to inflation and output by policymakers on interest-rate reaction functions and test for their existence. A modified New Keynesian framework which makes it possible to identify the dominant type of asymmetry is developed and...

In this paper, we provide determinacy conditions, i.e. conditions ensuring the existence and uniqueness of a bounded solution, in a purely forward-looking linear Markov switching rational expectations model. We thus settle the debate between Davig and Leeper (2007) and Farmer et al. (2010). The...

According to the Taylor rule, the Federal Reserve sets the funds rate based on an estimate of the economy's unutilized resources and the contemporaneous behavior of inflation. The primary policy prescription deriving from this view is that the Fed has failed to control inflation when it has not...