The central bank inflation bias in the presence of asymmetric preferences and non-normal shocks

Peel, D and Christodoulakis, G (2009) The central bank inflation bias in the presence of asymmetric preferences and non-normal shocks. Economics Bulletin, 29 (3). pp. 1608-1620. ISSN 1545-2921

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Abstract

We investigate the nature of the inflation bias in a model that exhibits asymmetries in preferences and non–normality in shocks but simplifies to the classic Barro-Gordon problem as a special case. The inflation bias is shown to depend on the trade-off between preference, structural and the scale and shape parameters of the model.