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On the asymmetric effects of money-supply shocks: international evidence from a panel of OECD countries

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  • Georgios Karras
  • Houston Stokes

Abstract

We examine whether the asymmetric effect of money on output is an international phenomenon, and investigate the reasons for this asymmetry. Quarterly data from the 1963-93 period for a panel of twelve OECD countries strongly support asymmetry internationally: negative money-supply shocks are shown to have a stronger effect on output than positive shocks. Our methodology also enables us to distinguish between two sets of theories consistent with the output asymmetries: a convex aggregate supply and a credit view. We find that the effects of money on prices are generally symmetric, which may be consistent with both sets of theories being operative at once.

Suggested Citation

  • Georgios Karras & Houston Stokes, 1999. "On the asymmetric effects of money-supply shocks: international evidence from a panel of OECD countries," Applied Economics, Taylor & Francis Journals, vol. 31(2), pages 227-235.
    • Handle: RePEc:taf:applec:v:31:y:1999:i:2:p:227-235
    DOI: 10.1080/000368499324453
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    References listed on IDEAS

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    1. Ricardo J. Caballero & Eduardo M.R.A. Engel, 1992. "Price Rigidities, Asymmetries, and Output Fluctuations," NBER Working Papers 4091, National Bureau of Economic Research, Inc.
    2. Assar Lindbeck & Dennis J. Snower, 1989. "The Insider-Outsider Theory of Employment and Unemployment," MIT Press Books, The MIT Press, edition 1, volume 1, number 026262074x, December.
    3. Donald P. Morgan, 1993. "Asymmetric effects of monetary policy," Economic Review, Federal Reserve Bank of Kansas City, vol. 78(Q II), pages 21-33.
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    3. Ahrens, Steffen & Pirschel, Inske & Snower, Dennis J., 2014. "A theory of wage adjustment under loss aversion," Kiel Working Papers 1977, Kiel Institute for the World Economy (IfW Kiel).
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    8. Jonathan Chiu & Miguel Molico, 2021. "Short-Run Dynamics in a Search-Theoretic Model of Monetary Exchange," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 133-155, October.

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