IDEAS home Printed from https://ideas.repec.org/p/red/append/19-163.html

Online Appendix to "What Do Monetary Contractions Do? Evidence From\ Large Tightenings"

Author

Listed:
  • Tim Willems

    (IMF)

Abstract

As the "Volcker shock" is believed to have generated useful information on the effects of monetary policy, this paper develops a transparent procedure to identify other significant monetary contractions. The approach is applied to a panel data set spanning 162 countries (over the period 1970-2017), in which it identifies 147 large monetary contractions. The procedure selects episodes where a protracted period of loose monetary policy was suddenly followed by sizeable interest rate increases. Focusing on contractions of significant size increases the signal-to-noise ratio, while they are unlikely to be accompanied by confounding "information effects" (markets interpreting a rate hike as the Central Bank being optimistic about the real side of the economy). A subsequent panel VAR analysis suggests that, on average, a 100-basis point rate hike reduces real GDP by 0.5 percent. This reduction in output seems to be persistent, pointing to a certain degree of hysteresis. The price level falls by 1.5 percent, indicating that the medium-/long-run impact of contractionary monetary shocks is not characterized by a neo-Fisherian response. Advanced economies appear to display more price stickiness than emerging/developing countries, as the former combine a more muted price response with a larger effect on output. (Copyright: Elsevier)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Tim Willems, 2020. "Online Appendix to "What Do Monetary Contractions Do? Evidence From\ Large Tightenings"," Online Appendices 19-163, Review of Economic Dynamics.
    • Handle: RePEc:red:append:19-163
    Note: The original article was published in the Review of Economic Dynamics
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/appendix/19/19-163/19-163.pdf
    Download Restriction: None
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Djeneba Dramé & Florian Léon, 2025. "Monetary Policy Shifts: How Firms Respond [Quand la politique monétaire change, les entreprises suivent]," Post-Print hal-05385539, HAL.
    2. Abuka, Charles & Alinda, Ronnie K. & Minoiu, Camelia & Peydró, José-Luis & Presbitero, Andrea F., 2019. "Monetary policy and bank lending in developing countries: Loan applications, rates, and real effects," Journal of Development Economics, Elsevier, vol. 139(C), pages 185-202.
    3. Paul Beaudry & Katsiaryna Kartashova & Césaire A Meh, 2022. "Gazing at r*: A Hysteresis Perspective," RBA Annual Conference Papers acp2022-08, Reserve Bank of Australia, revised Dec 2022.
    4. Djeneba Dramé & Florian Léon, 2025. "Do firms react to monetary policy in developing countries? [European Economic Review]," Post-Print hal-05172185, HAL.
    5. Mr. Luis Brandão-Marques & Mr. Gaston Gelos & Mr. Thomas Harjes & Ms. Ratna Sahay & Yi Xue, 2020. "Monetary Policy Transmission in Emerging Markets and Developing Economies," IMF Working Papers 2020/035, International Monetary Fund.
    6. Kevin L Kliesen, 2023. "A Comparison of Fed "Tightening" Episodes since the 1980s," International Journal of Central Banking, International Journal of Central Banking, vol. 19(3), pages 423-450, August.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:append:19-163. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.