The implications for optimal monetary policy of relaxing the normal assumption of a quadratic loss function are examined. Several alternative specifications are considered, but the results suggest that the convenient assumption of quadratic losses may not be that drastic

Monetary authorities often seem reluctant to discuss the conduct of monetary policy. There is a concern that greater openness in monetary policy-making may lead to volatility in financial markets, and specifically in interest rates. Although there is very little direct empirical evidence...