Abstract
ABSTRACT This paper seeks to develop a theoretical strand of research in monetary economics by modelling central bank ability in the loss function. Recently, many working papers issued by the International Monetary Fund (IMF) prove that some central banks, particularly from developing countries, are suffering from serious operational problems that might affect their abilities to control the economy. Simultaneously, a literature review shows that the movements are toward using asymmetric loss function. Therefore, we utilize this function in the standard monetary approach. The results proved that both central bank ability and preference in developing countries are fundamental to explain inflation bias and the movement of monetary policy instrument.
Original language | English |
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Pages (from-to) | 387-403 |
Number of pages | 17 |
Journal | Global Economic Review |
Volume | 37 |
Issue number | 3 |
DOIs | |
Publication status | Published - 2008 |
Externally published | Yes |
Keywords
- Asymmetric loss function
- Central bank ability
- Central bank losses
- Developing countries
- Inflation rate
ASJC Scopus subject areas
- General Economics,Econometrics and Finance
- Political Science and International Relations
- Business and International Management