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Nonlinear monetary policy in europe: fact or myth?

  • W.A. Bruinshoofd
  • B. Candelon

We hold the fort for linear specification of monetary policy and economic activity in Europe. Using data on the last two and a half decades we cannot reject the hypothesis that monetary policy is a linear process and we find mixed results regarding economic activity.

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File URL: http://www.dnb.nl/binaries/research%20memorandum%20wo%20no%20758_tcm46-146038.pdf
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Paper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 758.

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Length: 14 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:dnb:wormem:758
Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam
Web page: http://www.dnb.nl/en/
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  1. Anderson, H.M. & Vahid, F., 2000. "Predicting the Probability of a Recession with Nonlinear Autoregressive Leading Indicator Models," Monash Econometrics and Business Statistics Working Papers 3/00, Monash University, Department of Econometrics and Business Statistics.
  2. Caplin, A. & Leahy, J., 1989. "State-Dependent Pricing And The Dynamics Of Money And Output," Discussion Papers 1989_32, Columbia University, Department of Economics.
  3. Tom Engsted & Ken Nyholm, 2000. "Regime shifts in the Danish term structure of interest rates," Empirical Economics, Springer, vol. 25(1), pages 1-13.
  4. Robert B. Davies, 2002. "Hypothesis testing when a nuisance parameter is present only under the alternative: Linear model case," Biometrika, Biometrika Trust, vol. 89(2), pages 484-489, June.
  5. Caballero, R.J. & Engel, E.M.R.A., 1989. "Heterogeneity And Output Fluctuations In A Dynamic Menu Cost Economy," Discussion Papers 1989_40, Columbia University, Department of Economics.
  6. Karras, Georgios, 1996. "Why are the effects of money-supply shocks asymmetric? Convex aggregate supply or "pushing on a string"?," Journal of Macroeconomics, Elsevier, vol. 18(4), pages 605-619.
  7. Dolado, Juan J. & María-Dolores, Ramón & Naveira Barrero, Manuel, 2000. "Asymmetries In Monetary Policy Rules: Evidence For Four Central Banks," CEPR Discussion Papers 2441, C.E.P.R. Discussion Papers.
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  9. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  10. M Sensier & D R Osborn & N Öcal, 2002. "Asymmetric Interest Rate Effects for the UK Real Economy," Centre for Growth and Business Cycle Research Discussion Paper Series 10, Economics, The Univeristy of Manchester.
  11. Laurence Ball & N. Gregory Mankiw, 1992. "Asymmetric Price Adjustment and Economic Fluctuations," NBER Working Papers 4089, National Bureau of Economic Research, Inc.
  12. Peersman, Gert & Smets, Frank, 2001. "Are the effects of monetary policy in the euro area greater in recessions than in booms?," Working Paper Series 0052, European Central Bank.
  13. Cover, James Peery, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1261-82, November.
  14. 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 267-78, May.
  15. D H Kim & D R Osborn & M Sensier, 2002. "Nonlinearity in the Fed's Monetary Policy Rule," The School of Economics Discussion Paper Series 0205, Economics, The University of Manchester.
  16. Bennett T. McCallum, 2005. "Monetary policy and the term structure of interest rates," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-21.
  17. Dufrenot, Gilles & Mignon, Valerie & Peguin-Feissolle, Anne, 2004. "Business cycles asymmetry and monetary policy: a further investigation using MRSTAR models," Economic Modelling, Elsevier, vol. 21(1), pages 37-71, January.
  18. Kakes, Jan, 1998. "Monetary transmission and business cycle asymmetry," Research Report 98C36, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  19. 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.
  20. Lee, Tae-Hwy & White, Halbert & Granger, Clive W. J., 1993. "Testing for neglected nonlinearity in time series models : A comparison of neural network methods and alternative tests," Journal of Econometrics, Elsevier, vol. 56(3), pages 269-290, April.
  21. Bec Frédérique & Ben Salem Mélika & Collard Fabrice, 2002. "Asymmetries in Monetary Policy Reaction Function: Evidence for U.S. French and German Central Banks," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 6(2), pages 1-22, July.
  22. Cukierman, A., 1999. "The Inflation Bias Result Revisited," Papers 38-99, Tel Aviv.
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