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Are the Effects of Monetary Policy Asymmetric in Australia?

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This paper examines whether monetary policy shocks have asymmetric effects on output in Australia. Using methods similar to Cover (1992) together with some other simple threshold models, evidence is found of certain types of asymmetries when comparing monetary contractions to monetary policy expansions. Unanticipated decreases in interest rates appear to significantly raise GDP growth rates, whilst unexpected increases in rates do not appear to significantly lower growth. These findings are also found in a brief examination of the investment and consumption channels within the monetary policy transmission process. Economic growth is also significantly higher in a low interest rate regime (when interest rates are below a certain threshold, such as the sample average or average over some longer time period) than in a high interest rate environment. These results appear to refute the idea that monetary policy is like `pushing on a string', at least for Australian data over the period 1973:1-2005:1.

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Paper provided by School of Economics, University of Queensland, Australia in its series MRG Discussion Paper Series with number 0406.

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Handle: RePEc:qld:uqmrg6:04

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Cited by:
  1. Khundrakpam, Jeevan Kumar, 2013. "Are there Asymmetric Effects of Monetary Policy in India?," MPRA Paper 53059, University Library of Munich, Germany.
  2. Khundrakpam, Jeevan Kumar, 2013. "A Note on Differential Asymmetric Effects of Money Supply and Policy Rate Shocks in India," MPRA Paper 53058, University Library of Munich, Germany.

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