Asymmetric monetary policy in Australia

This theis investigates possible asymmetric responses in the conduct of the Australian monetary policy in the face of economic expansions and contractions. We use both a Linex function and a threshold quadratic function to characterize these asymmetries, and the parameters are estimated by the generalized method of moments (GMM). Our empirical results confirm that the Reserve Bank of Australia (RBA) has asymmetric preferences. In particular, the RBA appears to place a greater weight on stabilizing ouput during contractions than in expansions.