Asymmetric preferences in real-time learning and the Taylor rule
2014
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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