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Monetary transmission and business cycle asymmetry

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  • Kakes, Jan

    (Groningen University)

Abstract

This paper investigates asymmetric effects of monetary policy over the business cycle. A two-state Markov Switching Model is employed to model both recessions and expansions. For the United States and Germany, strong evidence is found that monetary policy is more effective in a recession than during a boom. Also some evidence is found for asymmetry in the United Kingdom and Belgium. In the Netherlands, monetary policy is not very effective in either regime.

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File URL: http://irs.ub.rug.nl/ppn/174868677
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Bibliographic Info

Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 98C36.

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Date of creation: 1998
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Handle: RePEc:dgr:rugsom:98c36

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References

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  1. Fabio C. Bagliano & Carlo A. Favero, . "Measuring Monetary Policy with VAR Models: an Evaluation," Working Papers 132, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Martin, Christopher, 1990. "Corporate Borrowing and Credit Constraints: Structural Disequilibrium Estimates for the U.K," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 78-86, February.
  3. Barran, Fernando & Peeters, Marga, 1998. "Internal finance and corporate investment: Belgian evidence with panel data," Economic Modelling, Elsevier, vol. 15(1), pages 67-89, January.
  4. Neftci, Salih N, 1984. "Are Economic Time Series Asymmetric over the Business Cycle?," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 307-28, April.
  5. Audretsch, David B & Elston, Julie Ann, 1994. "Does Firm Size Matter? Evidence on the Impacts of Liquidity Constraints on Firm Investment Behaviour in Germany," CEPR Discussion Papers 1072, C.E.P.R. Discussion Papers.
  6. Cover, James Peery, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1261-82, November.
  7. Elston, J-A, 1997. "Investment, Liquidity Constaints and Bank Relationships : Evidence from German Manufacturing Firms," Papers 17, American Institute for Contemporary German Studies-.
  8. Kakes, Jan, 1998. "Monetary transmission and bank lending in the Netherlands," Research Report 98C30, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  9. Thoma, Mark A., 1994. "Subsample instability and asymmetries in money-income causality," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 279-306.
  10. repec:ags:hiiedp:26306 is not listed on IDEAS
  11. Audretsch, David B. & Elston, Julie Ann, 2000. "Does firm size matter? Evidence on the impact of liquidity constraint on firm investment behavior in Germany," HWWA Discussion Papers 113, Hamburg Institute of International Economics (HWWA).
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Cited by:
  1. Ramón María-Dolores, 2002. "Asymmetries in the Cyclical Effects of Monetary Policy on Output: Some European Evidence," Working Papers 02-04, Asociación Española de Economía y Finanzas Internacionales.
  2. Ramos, Raul & Clar, Miquel & Surinach, Jordi, 1999. "EMU: some unanswered questions," ERSA conference papers ersa99pa220, European Regional Science Association.
  3. Anna Florio, 2005. "Asymmetric monetary policy: empirical evidence for Italy," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 751-764.
  4. Peersman, Gert & Smets, Frank, 2002. "The industry effects of monetary policy in the euro area," Working Paper Series 0165, European Central Bank.
  5. Peersman, Gert & Smets, Frank, 2001. "Are the effects of monetary policy in the euro area greater in recessions than in booms?," Working Paper Series 0052, European Central Bank.
  6. Bruinshoofd, Allard & Candelon, Bertrand, 2005. "Nonlinear monetary policy in Europe: fact or myth?," Economics Letters, Elsevier, vol. 86(3), pages 399-403, March.
  7. Roman Sustek, 2005. "Plant-Level Nonconvexities and the Monetary Transmission Mechanism," Working Papers 2005/09, Czech National Bank, Research Department.
  8. Sylvia Kaufmann, 2002. "Asymmetries in Bank Lending Behaviour. - Austria During the 1990s," Working Papers 56, Oesterreichische Nationalbank (Austrian Central Bank).
  9. Engelbert Stockhammer & Simon Sturn, 2008. "The Impact of Monetary Policy on Unemployment Hysteresis," IMK Working Paper 15-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  10. Vladimir Kuzin & Silke Tober, 2004. "Asymmetric Monetary Policy Effects in Germany," Discussion Papers of DIW Berlin 397, DIW Berlin, German Institute for Economic Research.

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