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The Asymmetric Effects of Monetary Policy in the Euro Area

Author

Listed:
  • Glenn Abela
  • Arianna Antezza
  • Alissa Gorelova
  • Gianmarco Meta
  • Roberta Montebello

Abstract

We study sign asymmetry in the effect of conventional monetary policy on key real macroeconomic variables in the euro area, using monthly data ranging from 2002 until 2022. We make use of local projections with state-dependence coming from the sign of the monetary policy shock, employing shocks identified using high-frequency identification. Our baseline findings suggest that there are asymmetries in the response of real variables to contractionary and expansionary monetary policy shocks. Furthermore, we investigate the potential sources of asymmetry by clustering countries that present similarities in proxies of labour, financial and housing markets, respectively. We find results that are consistent with theoretical predictions that downward nominal wage rigidities, sectoral composition of the economy, firm sizes as well as the housing market and housing debt conditions all contribute to the sign asymmetries we uncover in our baseline results.

Suggested Citation

  • Glenn Abela & Arianna Antezza & Alissa Gorelova & Gianmarco Meta & Roberta Montebello, 2026. "The Asymmetric Effects of Monetary Policy in the Euro Area," Discussion Papers of DIW Berlin 2165, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp2165
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    JEL classification:

    • 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

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