The purpose in this article is to investigate the implications of a non-linear supply curve for the standard discretionary inflation outcome obtained when the central bank has quadratic preferences. Some implications for the optimal output target and degree of conservativeness of the central...

Within the expected utility framework skewness of return has been suggested as a rationale for why risk averse gamblers might choose to gamble when expected returns are negative. The argument is that risk-averse agents desire positive skewness, ceteris paribus, and are prepared to trade off a...

A new test for nonlinear causality and also nonparametric procedures suggest significant nonlinearity in the implementation of the Taylor rule by the Bank of Korea (BOK). In particular, the response to the output gap appears nonlinear.

We use the BDS statistic to test for unmodelled structure in the linearly filtered industrial production figures for Canada, France, Japan and the USA between 1919 and 1930. The i.i.d. null is rejected for France and Japan though there is other evidence for nonlinearity in the remaining series....

This paper exploits the result that in the case of I(2) processes the precise dating of variables is crucial when empirically testing for cointegration. The data for the latter part of the German hyperinflation episode exhibit I(2) behaviour. We utilize these data to discriminate between...

The use of the power utility function is problematic in expected utility theory. We show that, this is also the case in cumulative prospect theory, where the power function violates the assumption of loss-aversion at small stake levels, so that an optimal model of gambling is precluded. In the...

Recent literature contains numerous examples where researchers continue to assert that a positive third derivative of the utility function of a risk-averse agent implies a preference for skewness, <italic>ceteris paribus</italic>. The purpose in this letter is to provide some examples pertinent to occupational...

In this note the implications of modelling uncertainty in the parameters of the central banks loss function in a multiplicative rather than additive manner are examined. The implications for expected inflation, linear inflation contracts and targets are derived.

Granger and Terasvirta provided an abstract example of a non-linear model that can generate data with the misleading linear property of long memory. They suggested that other non-linear models with this property are worth searching for. The empirical results of this article indicate that data...