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Temporal asymmetries in monetary transmission: Implications for interest rate policies

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  • Garcia, Piero
  • Quineche, Ricardo
  • Zapata, Juan

Abstract

When calibrating interest rate adjustments, central banks rely on models that treat tightening and easing as mirror images — yet transmission mechanisms may differ fundamentally across policy directions and time horizons. Using monthly U.S. data (1994–2024) and the NARDL framework, we document a systematic temporal reversal: Treasury yields at short-to-intermediate maturities respond more strongly to rate hikes in the short run, but this reverses in the long run where cuts generate greater ultimate adjustment, with asymmetry strengthening across the maturity spectrum. This temporal reversal is robust across crisis episodes, credit risk controls, and unconventional policy periods. Findings provide concrete advisory guidance: during easing cycles, policymakers should front-load cuts or sustain accommodation to offset delayed transmission; during tightening, lower long-run pass-through relative to easing implies larger hikes may be needed to achieve equivalent ultimate impact on yields. Differentiated communication strategies are warranted across policy cycle phases.

Suggested Citation

  • Garcia, Piero & Quineche, Ricardo & Zapata, Juan, 2026. "Temporal asymmetries in monetary transmission: Implications for interest rate policies," Journal of Policy Modeling, Elsevier, vol. 48(3).
    • Handle: RePEc:eee:jpolmo:v:48:y:2026:i:3:s0161893826000396
    DOI: 10.1016/j.jpolmod.2026.107045
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    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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