Is the Response of Output to Monetary Policy Asymmetric? Evidence from a Regime-Switching Coefficients Model
AbstractThis paper investigates regime switching in the response of U.S. output to a monetary policy action. We find substantial, statistically significant, time variation in this response that corresponds to "high response" and "low response" regimes. We then investigate whether the timing of the regime shifts are consistent with three particular manifestations of asymmetry by modeling the transition probabilities governing the switching process as functions of state variables. We find strong evidence that policy actions taken during recessions have larger effects than those taken during expansions. We find less evidence of asymmetry related to the direction or size of the policy action.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 37 (2005)
Issue (Month): 5 (October)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Ming Chien Lo & Jeremy Piger, 2003. "Is the response of output to monetary policy asymmetric? evidence from a regime-switching coefficients model," Working Papers 2001-022, Federal Reserve Bank of St. Louis.
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