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 7: Inflation Mean and its Components

Standard Deviation              2.7                        2.1

of the Output Gap                -                          -

Model-based inflation mean: E(π ) = π * - —σ² = π * - ^γ^σ^{2
v t,}          c 1 ^y          2κ ^y

Notes: Standard errors in brackets. The average inflation bias, which is defined as
the difference between the model-based average inflation and the inflation target, is
recovered from the estimates of the interest rate reaction function reported in Table 6
as (-c₄ σy2∕c₁ ). The standard errors are obtained using the delta method. 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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