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Asymmetric effects of monetary policy easing and tightening

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Monetary policy easing and tightening have asymmetric effects: a policy easing has large effects on prices but small effects on real activity variables. The opposite is found for a policy tightening: large real effects but small effects on prices. Nonlinearities are estimated using a new and simple procedure based on linear Strutural Vector Autoregressions with exogenous variables (SVARX). We rationalize the result through the lens of a simple model with downward nominal wage rigidities

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  • Davide Debortoli & Mario Forni & Luca Gambetti & Luca Sala, 2020. "Asymmetric effects of monetary policy easing and tightening," Economics Working Papers 1742, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1742
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    Cited by:

    1. Leonardo Nogueira Ferreira, 2023. "Monetary Policy Surprises, Financial Conditions, and the String Theory Revisited," Working Papers Series 573, Central Bank of Brazil, Research Department.
    2. Joscha Beckmann & Klaus-Jürgen Gern & Nils Jannsen, 2022. "Should they stay or should they go? Negative interest rate policies under review," International Economics and Economic Policy, Springer, vol. 19(4), pages 885-912, October.
    3. Martin Bruns & Michele Piffer, 2021. "Monetary policy shocks over the business cycle: Extending the Smooth Transition framework," University of East Anglia School of Economics Working Paper Series 2021-07, School of Economics, University of East Anglia, Norwich, UK..
    4. Ryan Niladri Banerjee & Valerie Boctor & Aaron Mehrotra & Fabrizio Zampolli, 2022. "Fiscal deficits and inflation risks: the role of fiscal and monetary policy regimes," BIS Working Papers 1028, Bank for International Settlements.

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    More about this item

    Keywords

    monetary policy shocks; nonlinear effects; structural VAR models;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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