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)

2.5

Figure 1a: Preference over Inflation Stabilization

1.5

-1.5

-0.5       □       0.5

Deviation from Inflation Target

---standard quadratic (alpha = 0)
--- asymmetric (alpha =1.5)

Deviation from Potential Output

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