Asymmetric Preference and Inflation Bias in the Visegrad Four

This paper investigates the asymmetric preference of monetary policy in the Visegrad four (V-4). To this end, we estimate the nonlinear interest rate rule provided by Surico (2007). This enables us to estimate the central banker’s preference and to inference the average inflation bias. Empirical results provide some important evidence. First, the nonlinear rule and the preference are successfully estimated. This also imply that the average rates of inflation in the V-4 are set at a relatively high by their monetary policy. Second, After EU accession, the preferences of Slovakia and Poland become much lower than those in the full sample. This reflects the policy effort by these two to introduce the euro.