Inflation Targeting and Nonlinear Policy Rules: The Case of Asymmetric Preferences (new title: The Fed's monetary policy rule and U.S. inflation: The case of asymmetric preferences)

Table 4: Structural Estimates

- baseline normalization of the orthogonality conditions -

Specification:

E_t-1I ^{- μ}(it ^{- i}*)⁺(^{1 -} ρ)f(^π, ^{- π})^{+ λ}y_t ^{+ α}(π_t ^{- π})^{2 + γλ}У2 '' ⁺ ρi-1 ^{- i}*) ^zt-11 = 0
∣L κφ               V           κ 2            2κ J            J

Notes: This table reports the nonlinear GMM estimates of the structural parameters α and
γ. The estimates of the reduced-form coefficients are recovered from the estimates of the
structural parameters while the standard errors are computed using the delta method.
Inflation, output gap and the instrument set zt-1 correspond to the baseline measures
described in the notes to Table 1. The t-type test refers to the null hypothesis (μZκφ) =0.
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 α=γ=0. 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.

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