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Modeling Quantile Dependence: A New Look at the Money-Output Relationship

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  • Nicholas C.S. Sim

    () (School of Economics, University of Adelaide)

Abstract

Do money supply shocks influence output growth asymmetrically? At different levels of output growth, would the influence of the same monetary policy stance vary? To address these questions, we propose a series-estimation method that models the quantile of output growth on the quantile of money supply shock, where restrictive (expansive) policies are represented by the left (right) tail of the shockÂ’s distribution. Generally, we find that each quantile of output growth responds more to restrictive than expansive money supply shocks. For M2 money supply, both restrictive and expansive shocks become even more effective when applied to output growth in its tails.

Suggested Citation

  • Nicholas C.S. Sim, 2009. "Modeling Quantile Dependence: A New Look at the Money-Output Relationship," School of Economics Working Papers 2009-34, University of Adelaide, School of Economics.
  • Handle: RePEc:adl:wpaper:2009-34
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    File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2009-34.pdf
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    References listed on IDEAS

    as
    1. Lee, Sokbae, 2007. "Endogeneity in quantile regression models: A control function approach," Journal of Econometrics, Elsevier, vol. 141(2), pages 1131-1158, December.
    2. Randall E. Parker & Philip Rothman, 2004. "An Examination of the Asymmetric Effects of Money Supply Shocks in the Pre--World War I and Interwar Periods," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 88-100, January.
    3. Donald P. Morgan, 1993. "Asymmetric effects of monetary policy," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 21-33.
    4. Rhee, Wooheon & Rich, Robert W., 1995. "Inflation and the asymmetric effects of money on output fluctuations," Journal of Macroeconomics, Elsevier, vol. 17(4), pages 683-702.
    5. Karras, Georgios, 1996. "Are the Output Effects of Monetary Policy Asymmetric? Evidence from a Sample of European Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 267-278, May.
    6. Victor Chernozhukov & Christian Hansen, 2005. "An IV Model of Quantile Treatment Effects," Econometrica, Econometric Society, vol. 73(1), pages 245-261, January.
    7. Zernov, Serguei & Zinde-Walsh, Victoria & Galbraith, John W., 2009. "Asymptotics for estimation of quantile regressions with truncated infinite-dimensional processes," Journal of Multivariate Analysis, Elsevier, vol. 100(3), pages 497-508, March.
    8. James Peery Cover, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1261-1282.
    9. Koenker, Roger & Park, Beum J., 1996. "An interior point algorithm for nonlinear quantile regression," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 265-283.
    10. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    11. Newey, Whitney K., 1997. "Convergence rates and asymptotic normality for series estimators," Journal of Econometrics, Elsevier, vol. 79(1), pages 147-168, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    monetary policy; output growth; quantile regression; quantile dependence; series estimation.;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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