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Conventional and unconventional monetary policy reaction to uncertainty in advanced economies: evidence from quantile regressions


  • Christou Christina

    () (Open University of Cyprus, School of Economics and Finance, 2220 Latsia, Cyprus)

  • Naraidoo Ruthira


  • Gupta Rangan

    () (Department of Economics, University of Pretoria, Pretoria 0002, South Africa)


This paper investigates how the Federal Reserve (Fed) and the Bank of England, Bank of Japan and the European Central Bank reacted in the aftermath of the financial crisis by making use of both conditional and unconditional interest rate quantiles regressions and data on shadow short rate of interest and a measure of uncertainty. Firstly, the unconditional quantile regression offers some support for increased reaction by the Fed as the ZLB is approached. Secondly, the decreased reaction of the Fed and other monetary policy makers towards uncertainty particularly at lower conditional quantiles of interest rates lends support to expansionary mechanism in place during this time. Hence uncertainty is key to policy reaction, and more so during episodes of crisis.

Suggested Citation

  • Christou Christina & Naraidoo Ruthira & Gupta Rangan, 2020. "Conventional and unconventional monetary policy reaction to uncertainty in advanced economies: evidence from quantile regressions," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 24(3), pages 1-17, June.
  • Handle: RePEc:bpj:sndecm:v:24:y:2020:i:3:p:17:n:4
    DOI: 10.1515/snde-2018-0056

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    Cited by:

    1. Semih Emre Cekin & Besma Hkiri & Aviral Kumar Tiwari & Rangan Gupta, 2019. "The Relationship between Monetary Policy and Uncertainty in Advanced Economies: Evidence from Time- and Frequency-Domains," Working Papers 201904, University of Pretoria, Department of Economics.

    More about this item


    advanced economies; conditional and unconditional quantile regressions; interest rate rule; shadow rate of interest; uncertainty; zero lower bound;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy


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