The Transmission Mechanism in Good and Bad Times

Haroon Mumtaz and Paolo Surico

No 10083, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Does the transmission of economic policies and structural shocks vary with the state of the economy? We answer this question using a strategy based on quantile regressions, which account for both endogeneous regressors and state-dependent parameters. An application to U.S. real activity and interest rate reveals pervasive asymmetries in the propagation mechanism of economic disturbances across good and bad times. During periods in which real activity is above its conditional average, the estimates of the degree of forward-lookingness and interest rate semi-elasticity are significantly larger (in absolute value) than the estimates associated with below-average periods. Results are robust to alternative estimation strategies to model state-dependent parameters.

Keywords: Asymmetric transmission mechanism; Consumption; State-dependence (search for similar items in EconPapers)
JEL-codes: E21 E32 E52 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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Journal Article: THE TRANSMISSION MECHANISM IN GOOD AND BAD TIMES (2015)
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