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Some Additional Evidence from the Credit Channel on the Response to Monetary Shocks: Looking for Asymmetries

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Author Info
Fabio ALESSANDRINI
Abstract

The credit channel of monetary policy has both cross-sectional and timeseries implications for the reaction of the economy to monetary shocks. This paper focuses on the more rarely investigated time-series aspect and shows that the economy has varying sensitivity to monetary shocks over time. By using a Threshold VAR model, we find that output and credit spreads react much stronger to monetary shocks when cash flows or dividends are low. This distinction in the regimes is in particular more significant than one based on the stage of the business cycle or on the stance of monetary policy. In this sense, the response to a tightening for instance cannot be considered as constant and traditional impulse-response functions have to be taken with some caution.

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Publisher Info
Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 03.04.

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Length: 41 pages
Date of creation: Feb 2003
Date of revision:
Handle: RePEc:lau:crdeep:03.04

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Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.65
Web page: http://www.hec.unil.ch/deep/publications-english/e-cahiers.htm

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Related research
Keywords: credit channel; ThresholdVector Autoregression (TVAR); asymmetric responses;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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