Asymmetries in Monetary Policy

Benigno, Pierpaolo and Rossi, Lorenza (2021) Asymmetries in Monetary Policy. European Economic Review, 140. ISSN 0014-2921

Text (CEPR-DP15944)
CEPR_DP15944.pdf - Accepted Version
Restricted to Repository staff only until 26 October 2023.
Available under License Creative Commons Attribution-NonCommercial-NoDerivs.

Download (633kB)


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.

Item Type:
Journal Article
Journal or Publication Title:
European Economic Review
Additional Information:
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
Uncontrolled Keywords:
ID Code:
Deposited By:
Deposited On:
07 Oct 2021 14:20
Last Modified:
22 Nov 2022 10:43