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Asymmetric Effects of Monetary Policy: Evidence from the Yield Curve



Recent empirical studies examining the asymmetric effects of monetary shocks on economic activity do not systematically control for the non-monetary sources of fluctuations as well as the endogenous component of monetary policy. The evidence of asymmetry could simply reflect the failure to control for these omitted factors. In this paper, we reconsider the asymmetric effects of monetary shocks in the context of a small open economy using information from the yield curve to measure the stance of domestic monetary policy, while allowing both real and monetary foreign shocks to have asymmetric effects on output. Our principal finding is that while controlling for foreign factors dampens the asymmetry in the effects of exogenous domestic monetary shocks, there is nonetheless strong evidence of asymmetry when the effects of the exogenous and systematic components of the yield spread are considered jointly. We find no evidence of asymmetry in the effects of real factors. Des études empiriques récentes qui ont considéré les effets asymétriques des chocs monétaires sur l'activité économique n'ont pas contrôlé ni pour des sources non monétaires des fluctuations, ni pour la composante endogène de la politique monétaire. Les éléments d'évidence empirique en faveur de l'asymétrie pourraient simplement refléter l'omission de certains de ces autres facteurs. Nous reconsidérons ici les effets asymétriques des chocs monétaires dans le contexte d'une petite économie ouverte en utilisant l'information de la courbe de rendements pour mesurer l'état de la politique monétaire domestique, tout en permettant à des facteurs réels et monétaires extérieurs d'influencer asymétriquement la production. Notre principal résultat est de trouver une forte évidence d'asymétrie des chocs monétaires lorsque les effets des composantes exogène et systématique de la courbe de rendement sont pris en compte conjointement, même en contrôlant pour les facteurs externes. Cependant, nos résultats empiriques ne supportent pas l'existence d'effets asymétriques associés aux facteurs réels.

Suggested Citation

  • Tiff Macklem & Alain Paquet & Louis Phaneuf, 1996. "Asymmetric Effects of Monetary Policy: Evidence from the Yield Curve," Cahiers de recherche CREFE / CREFE Working Papers 42, CREFE, Université du Québec à Montréal.
  • Handle: RePEc:cre:crefwp:42

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    References listed on IDEAS

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    Cited by:

    1. Reinhart, Carmen & Reinhart, Vincent, 1996. "Forecasting turning points in Canada," MPRA Paper 13884, University Library of Munich, Germany.
    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. Chu, Joonsuk & Ratti, Ronald A., 1999. "On the relevance of distinctions between anticipated, unanticipated expansionary, and unanticipated contractionary monetary policy," Journal of Economics and Business, Elsevier, vol. 51(2), pages 109-131, March.
    4. Burstein, Ariel T., 2006. "Inflation and output dynamics with state-dependent pricing decisions," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1235-1257, October.
    5. Kevin X.D. Huang & Jonathan Willis, 2012. "Sectoral Interactions and Monetary Policy Under Costly Price Adjustments," 2012 Meeting Papers 883, Society for Economic Dynamics.
    6. Richard Black & David Rose, 1997. "Canadian Policy Analysis Model: CPAM," Staff Working Papers 97-16, Bank of Canada.
    7. Atta-Mensah, Joseph & Tkacz, Greg, 1998. "Predicting Canadian Recessions Using Financial Variables: A Probit Approach," Staff Working Papers 98-5, Bank of Canada.
    8. Anna Florio, 2005. "Asymmetric monetary policy: empirical evidence for Italy," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 751-764.
    9. Gabriel Srour, 2001. "Why Do Central Banks Smooth Interest Rates?," Staff Working Papers 01-17, Bank of Canada.

    More about this item


    Monetary policy; asymmetry; yield curve;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit


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