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This paper studies the proposition that an inflation bias can arise in a setup where a central banker with asymmetric preferences targets the natural unemployment rate. Preferences are asymmetric in the sense that positive unemplo...
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This paper studies the proposition that an inflation bias can arise in a setup where a central banker with asymmetric preferences targets the natural unemployment rate. Preferences are asymmetric in the sense that positive unemployment deviations fromthe natural rate are weighted more (or less) severely than negative deviations in the central banker's loss function. The bias is proportional to the conditional variance of unemployment. The time-series predictions of the model are evaluated using datafrom G7 countries. Econometric estimates support the prediction that the conditional variance of unemployment and the rate of inflation are positively related.
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Recent research has proposed fitting responses from discrete choice experiments to asymmetric value functions consistent with prospect theory, taking into account respondents' reference points in their valuation of choice attribut...
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Recent research has proposed fitting responses from discrete choice experiments to asymmetric value functions consistent with prospect theory, taking into account respondents' reference points in their valuation of choice attributes. Previous studies have mainly concentrated on travel time and cost attributes, while evidence regarding road safety attributes is very limited.
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Abstract In a simple continuous‐time model where the learning process affects the willingness to hold liquidity, we provide an intuitive explanation of business cycle asymmetry and postcrisis slow recovery. When observing a liqui...
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Abstract In a simple continuous‐time model where the learning process affects the willingness to hold liquidity, we provide an intuitive explanation of business cycle asymmetry and postcrisis slow recovery. When observing a liquidity shock, individuals rationally increase their subjective probability of re‐encountering it. It leads to an upward jump in liquidity preference and a discrete fall in consumption. Conversely, as a period without shocks continues, they gradually decrease the subjective probability, reduce liquidity preference, and increase consumption. The recovery process is particularly slow after many shocks are observed within a short period because people do not easily change their pessimistic view.
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Whether central banks place the same weights on positive and negative deviations of inflation and of the output gap from their respective targets is an interesting question regarding monetary policy. The literature has sought to a...
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Whether central banks place the same weights on positive and negative deviations of inflation and of the output gap from their respective targets is an interesting question regarding monetary policy. The literature has sought to address this issue using a specific asymmetric function, the so-called Linex loss function. However, is the Linex an actually asymmetric specification? In an attempt to answer this question, we applied the sieve estimation method, a fully nonparametric approach, in which the result could be any proper loss function. This way, our results could corroborate the quadratic or Linex loss functions used in the literature or suggest an entirely new function. We applied the sieve estimation method to the United States and to Brazil, an emergent country which has consistently followed an inflation targeting regime. The economy was modeled with forward-looking agents and central bank commitment. Our results indicate that the FED was more concerned with inflation rates below the target, but no asymmetry was found in the inflation-output process in the Volcker-Greenspan period. As to Brazil, we found asymmetries in output gaps from 2004 onwards, when the Brazilian Central Bank was more concerned with positive output gaps; but we did not find any statistically significant asymmetries in inflation. (C) 2015 Elsevier B.V. All rights reserved.
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Mating behaviour affects reproductive isolation and phenotypic differentiation. In Lake Tanganyika, the cichlid fish Tropheus moorii diversified into numerous, currently allopatric colour variants. Allopatric isolation is periodic...
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Mating behaviour affects reproductive isolation and phenotypic differentiation. In Lake Tanganyika, the cichlid fish Tropheus moorii diversified into numerous, currently allopatric colour variants. Allopatric isolation is periodically interrupted by dispersal and secondary contact during lake level fluctuations, making long-term differentiation partly dependent on assortative mating. Laboratory experiments with two moderately distinct morphs revealed assortative female preferences in one (Nakaku), but random mate choice in the other morph (Mbita). No discrimination was apparent between two subtly differentiated morphs (Chimba and Moliro). Tested against each other in a previous study, the highly distinct Moliro and Nakaku exhibited strong assortative preferences. The correlation between colour pattern similarity and mate discrimination suggests that allopatry and philopatric behaviour are less crucial for the maintenance of differentiation between highly distinct morphs than for more similar morphs. Interestingly, the asymmetric isolation in one pair of morphs is congruent with a pattern of unidirectional mitochondrial introgression between populations.
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Revealing the underlying preferences of a forecaster has always been at the core of much controversy. Herein, we build on the multivariate loss function concept and propose a flexible and multivariate family of likelihoods. This a...
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Revealing the underlying preferences of a forecaster has always been at the core of much controversy. Herein, we build on the multivariate loss function concept and propose a flexible and multivariate family of likelihoods. This allows examining whether a vector of forecast errors, along with control variables, shapes a forecaster's preferences and, therefore, the underlying multivariate, nonseparable, loss function. We estimate the likelihood function using Bayesian exponentially tilted empirical likelihood, which reveals the shape of the parameter and the power of the multivariate loss function. In the empirical section, the reported evidence reveals that the EU Commission forecasts are predominantly asymmetric, leaning towards optimism in the year ahead, while a correction towards pessimism occurs in the current year forecast. There is some variability of this asymmetry across member states, with forecasts, i.e. gross domestic product growth, for large Member States exhibiting more optimism
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This paper builds on the Lucas' (1973) signal extraction model to study the time-varying effect of uncertainty in the output-inflation trade-off on inflation, using a monetary model with asymmetric central bank preferences whereby...
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This paper builds on the Lucas' (1973) signal extraction model to study the time-varying effect of uncertainty in the output-inflation trade-off on inflation, using a monetary model with asymmetric central bank preferences whereby deviations of output (relative to target) from above are weighted differently from deviations from below. The model is investigated empirically using data from the South African Reserve Bank (SARB). We show that the implication of the uncertainty element is to cause the authority to change its indirect control, output by less (and hence change it direct control, interest rate by less) whenever inflation is below or above the target, in line with Brainard's attenuation principle. We also find that SARB's asymmetric output stabilization explains inflation movements significantly, and that the monetary authority seems to be more averse to business cycle recessions than expansions, hence more keen to avoid recessions than expansions. Overall, a more transparent and committed monetary policy practice that would reduce uncertainty over the output-inflation trade-off would be helpful for economic stability. (C) 2016 Elsevier B.V. All rights reserved.
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This paper contributes to the fiscal response literature. By appropriately incorporating asymmetric policy preferences, it derives a model that the literature has long been searching for. It proceeds by discussing the implications...
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This paper contributes to the fiscal response literature. By appropriately incorporating asymmetric policy preferences, it derives a model that the literature has long been searching for. It proceeds by discussing the implications regarding the results from previous studies.
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This paper employs an indirect approach to formally examine the evolutionary stability of interdependent preferences when players randomly engage in pairwise interactions. Following the model specification for altruism and spitefu...
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This paper employs an indirect approach to formally examine the evolutionary stability of interdependent preferences when players randomly engage in pairwise interactions. Following the model specification for altruism and spitefulness in experiments proposed by Levine (1998), we also explore the stability of reciprocity and reciprocal preferences. In particular, we study how individuals equipped with intrinsic preferences such as altruism, selfishness or spitefulness adjust their behavior depending on who they interact with. The key aspect of our method is that behavioral preferences are choice variables that optimally evolve, accounting for strategic interaction. Our model predicts that in a specific economic framework characterized by negative externalities and strategic substitutes, there is a continuum of evolutionary stable interdependent preference profiles: At least one player behaves spitefully, and at most one acts selfishly. The emergence of altruism as an evolutionarily stable preference crucially depends on how large the support for preferences is. When players have reciprocal preferences, altruism might arise even in meetings where one player is intrinsically spiteful, but not necessarily from the intrinsically altruistic player.
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Branch (2014) shows that the asymmetric preference of professional forecasters enhances the fit of the original Taylor rule with respect to recent US monetary policy. This paper investigates the stability of the Taylor rule with a...
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Branch (2014) shows that the asymmetric preference of professional forecasters enhances the fit of the original Taylor rule with respect to recent US monetary policy. This paper investigates the stability of the Taylor rule with asymmetric preference under adaptive learning. We find that when policy omits asymmetry and learning volatility, a more vigorous response to inflation than the pure Taylor principle is required.
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