Testing for asymmetries in the preferences of the euro-area monetary policymaker

• Type: Article in International Scientific Journal
• Date: 2008

Authors

Álvaro Aguiar (Author) FEP; Manuel Mota Freitas Martins (Author) FEP

Journal

Title: Applied Economics

Vol. 40 No. 13

Pages: 1651-1667

ISSN: 0003-6846

Publisher: Taylor & Francis

Indexing

ISI Web of Knowledge - 15 Citations

ISI Web of Science

Scopus - 19 Citations

Business Source Complete (EBSCO)

Scientific classification

FOS: Social sciences > Economics and Business

CORDIS: Social sciences > Economics

Other information

Authenticus ID: P-004-2K9

DOI: 10.1080/00036840600870999

Abstract (EN): This article tests for asymmetries in the preferences of the euro-area monetary policymaker with 1995:1-2005:2 data from the latest update of the European Central Bank's (ECB's) Area-wide database. Following the relevant literature, we distinguish between three types of asymmetry: precautionary demand for expansions, precautionary demand for price stability and interest rate smoothing asymmetry. Based on the joint generalized method of moments (GMM) estimation of the Euler equation of optimal policy and the aggregate supply-aggregate demand (AS-AD) structure of the macroeconomy, we find evidence of precautionary demand for price stability in the preferences revealed by the monetary policymaker. This type of asymmetry is consistent with the ECB's definition of price stability and with the priority of credibility-building by a recently created monetary authority.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 17