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Are the Effects of Monetary Policy Asymmetric?

  • Garcia, R.
  • Schaller, H.

By building on the Hamilton (1989) Markov switching model, we examine questions like: Does monetary policy have the same effect in expansions and recessions? Given that the economy is currently in a recession, does a fall in interest rates increase the probability of an expansion? Does monetary policy have an incremental effect on the growth rate within a given state, or does it only affect the economy if it is sufficiently strong to induce a state change (e.g., from recession to expansion)? As suggested by models with sticky prices or finance constraints, interest rate changes have larger effects during recessions. Copyright 2002, Oxford University Press.

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File URL: http://hdl.handle.net/1866/2062
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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 9505.

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Length: 40 pages
Date of creation: 1995
Handle: RePEc:mtl:montde:9505
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