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Are the Effects of Monetary Policy Asymmetric?

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Author Info
René Garcia
Huntley Schaller

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Abstract

This paper focuses on whether monetary policy has asymmetric effects. By building on the Markov switching model introduced by Hamilton (1989), we examine questions like: Does monetary policy have the same effect regardless of the current phase of economic fluctuations? Given that the economy is currently in a recession, does a fall in interest rates increase the probability of an expansion? Does monetary policy have an incremental effect on the growth rate within a given state, or does it only affect the economy if it is sufficiently strong to induce a state change (e.g., from recession to expansion)? We find economically and statistically significant evidence of asymmetry. As suggested by models with sticky prices or finance constraints, interest rate changes have larger effects during recessions. Interest rates also have substantial effects on the probability of a state switch.

Le présent article étudie si la politique monétaire a des effets asymétriques. En développant le modèle à changements de régime markoviens introduit par Hamilton (1989), nous examinons des questions du genre : La politique monétaire a-t-elle les mêmes effets selon les différentes phases du cycle économique ? Étant donné que l'économie est actuellement en récession, une baisse des taux d'intérêt accroît-elle la probabilité d'une expansion ? La politique monétaire a-t-elle un effet sur le taux de croissance de l'économie au sein d'une phase donnée, ou n'affecte-t-elle l'économie que si elle est suffisamment soutenue pour entraîner un changement de phase (p. ex. d'une récession à une expansion) ? Nous trouvons des effets asymétriques importants économiquement et statistiquement significatifs. Comme le suggèrent les modèles supposant un ajustement lent des prix ou l'existence de contraintes financières, les changements de taux d'intérêt ont des effets plus importants durant les récessions. Les taux d'intérêt ont également des effets substantiels sur la probabilité d'un changement d'état de l'économie.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 95s-06.

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Date of creation: 01 Feb 1995
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Handle: RePEc:cir:cirwor:95s-06

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Related research
Keywords: Monetary policy; Markov switching model; Interest rates; Politique monétaire ; Modèle à changements de régime markoviens ; Taux d'intérêt;

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christian Melzer & Thorsten Neumann, 2005. "Changing Effects of Monetary Policy in the U.S. –Evidence from a Time-Varying Coefficient VAR," Computing in Economics and Finance 2005 144, Society for Computational Economics. [Downloadable!]
  2. Tuysuz, Sukriye, 2007. "The asymmetric impact of macroeconomic announcements on U.S. Government bond rate level and volatility," MPRA Paper 5381, University Library of Munich, Germany. [Downloadable!]
  3. A. Olmedo, 2002. "Asymmetries in the Central Bank Behaviour," THEMA Working Papers 2002-06, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
  4. Pichette, Lise, 1998. "La politique monétaire a-t-elle des effets asymétriques sur l'emploi?," Working Papers 98-17, Bank of Canada. [Downloadable!]
  5. Erdinc Telatar & Mubariz Hasanov, 2006. "The asymmetric effects of monetary shocks: the case of Turkey," Applied Economics, Taylor and Francis Journals, vol. 38(18), pages 2199-2208, October. [Downloadable!] (restricted)
  6. Munehisa Kasuya, 2005. "Regime-switching approach to monetary policy effects," Applied Economics, Taylor and Francis Journals, vol. 37(3), pages 307-326, February. [Downloadable!] (restricted)
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  8. Ramón María-Dolores, 2001. "Asimetrías en los efectos de la política monetaria en España (1977-1996)," Investigaciones Economicas, Fundación SEPI, vol. 25(2), pages 391-415, May. [Downloadable!]
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  10. Tiff Macklem & Alain Paquet & Louis Phaneuf, 1996. "Asymmetric Effects of Monetary Policy: Evidence from the Yield Curve," Cahiers de recherche CREFE / CREFE Working Papers 42, CREFE, Université du Québec à Montréal. [Downloadable!]
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  12. Sustek, Roman, 2009. "Nonconvex Margins of Output Adjustment and Aggregate Fluctuations," MPRA Paper 17486, University Library of Munich, Germany. [Downloadable!]
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  14. Jan Jacobs & Jan Kakes, 2000. "Credit demand asymmetry in the Netherlands 1983-1997," MEB Series (discontinued) 2000-11, Netherlands Central Bank, Monetary and Economic Policy Department. [Downloadable!]
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  17. Marilyne Huchet-Bourdon, 2003. "Does single monetary policy have asymmetric real effects in EMU ?," Post-Print halshs-00143785_v1, HAL. [Downloadable!]
  18. Gert Peersam & Frank Smets, 2002. "The industry effects of monetary policy in the Euro area," Working Paper Series 165, European Central Bank. [Downloadable!]
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  19. Fabio ALESSANDRINI, 2003. "Some Additional Evidence from the Credit Channel on the Response to Monetary Shocks: Looking for Asymmetries," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 03.04, Université de Lausanne, Faculté des HEC, DEEP. [Downloadable!]
  20. Sylvia Kaufmann, 2001. "Asymmetries in bank lending behavior: Austria during the 1990s," Working Paper Series 097, European Central Bank. [Downloadable!]
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  21. M Sensier & D R Osborn & N Öcal, 2002. "Asymmetric Interest Rate Effects for the UK Real Economy," Centre for Growth and Business Cycle Research Discussion Paper Series 10, Economics, The Univeristy of Manchester. [Downloadable!]
    Other versions:
  22. Maximo Camacho, 2002. "Nonlinear stochastic trends and economic fluctuations," Computing in Economics and Finance 2002 274, Society for Computational Economics. [Downloadable!]
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