Asymmetric Monetary Policy Effects in Germany
In a small structural model we find asymmetries in the effects of monetary policy in Germany depending on whether the economy is in an upswing or a downswing. These two different regimes are also identified using a Markov-switching model and the Kalman filter. Our results indicate that the effects of monetary policy are significantly higher in a downswing than in an upswing. It follows not only that monetary policy has to raise interest rates markedly if an economy is overheating but also that once a downturn is discernible, interest rates have to be lowered rapidly so as to prevent an overly large reaction of the real economy.
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- Kakes, Jan, 1998. "Monetary transmission and business cycle asymmetry," Research Report 98C36, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
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- Lo, Ming Chien & Piger, Jeremy, 2005.
"Is the Response of Output to Monetary Policy Asymmetric? Evidence from a Regime-Switching Coefficients Model,"
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Blackwell Publishing, vol. 37(5), pages 865-886, October.
- Ming Chien Lo & Jeremy M. Piger, 2003. "Is the response of output to monetary policy asymmetric? evidence from a regime-switching coefficients model," Working Papers 2001-022, Federal Reserve Bank of St. Louis.
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