Table 3: Reduced-form Estimates
- alternative measure of output gap -
1960:1 -1979:2 |
1982:4 2003:2 | |
c1 |
0.67** |
2.63** |
(0.09) |
(0.34) | |
c2 |
1.45** |
2.17** |
(0.31) |
(0.35) | |
c3 |
-0.02 |
0.07 |
(0.02) |
(0.18) | |
c4 |
-0.17** |
-0.19 |
(0.04) |
(0.10) | |
ρ |
0.72** |
0.83** |
(0.05) |
(0.02) | |
i* |
5.4 |
6.0 |
π* |
4.1 |
2.9 |
α |
-0.06 |
0.06 |
(0.04) |
(0.13) | |
γ |
-0.25** |
-0.18 |
(0.07) |
(0.095) | |
W(2) p-value |
.00 0 |
.16 1 |
F-stat p-value |
.00/.00 |
.00/.00 |
J(19) p-value_______ |
________.969______________ |
_______________.895_______________ |
Specification: it = (1 - ρ)i* +c1 (πt - π ) + c2yt + c3 (πt - π )2 + c4y2 ] + ρt-1 + νt
Notes: Standard errors using a four lag Newey-West covariance matrix are reported in
brackets. Inflation is measured as changes in the personal consumption deflator and the
output gap is obtained with the Hodrick-Prescott filter (smoothing parameter = 1600).
The instrument set includes four lags of inflation, squared inflation, output gap, squared
output gap, the fed funds rate and gdp inflation. The asymmetric preference parameters
are computed as α=2c3Zc1 and γ=2c√c2 while the standard errors are obtained using the
delta method. W(n) refers to the Wald statistics of the test for n parameter restrictions,
which is distributed as a χ2(n) under the joint null hypothesis c3=c4=0. The latter is
equivalent to the original null of symmetric central bank preferences, α=γ=0. F-stat
refers to the statistics of the hypothesis testing for weak instruments relative to
inflation and output gap, respectively. J(m) refers to the statistics of Hansen’s test for m
overidentifying restrictions which is distributed as a χ2(m) under the null hypothesis of
valid overidentifying restrictions. The superscript ** and * denote the rejection of the
null hypothesis that the true coefficient is zero at the 1 percent and 5 percent significance
levels, respectively.
24
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