Monetary Asymmetries without (and with) Price Stickiness

Ivan Jaccard

No 81, Dynare Working Papers from CEPREMAP

Abstract: The evidence suggests that monetary policy transmission is asymmetric over the business cycle. Interacting financing frictions with a preference for liquidity provides an explanation for this fact. Our mechanism generates monetary asymmetries in a model that jointly reproduces a set of asset market and business cycle facts. Accounting for the joint dynamics of asset prices and business cycle fluctuations is key; in a variant of the model that is unable to produce realistic macro-finance implications, monetary asymmetries disappear. Our results suggest that asymmetries in the transmission mechanism critically depend on the macro-finance implications of monetary policy models, and that resorting to nonlinear techniques is not sufficient to detect monetary asymmetries.

Keywords: Money Demand; Nonlinear Solution Methods; Asset Pricing in DSGE Models; Term Premium; Stochastic Discount Factor (search for similar items in EconPapers)
JEL-codes: E31 E44 E58 (search for similar items in EconPapers)
Pages: 81 pages
Date: 2024-05
New Economics Papers: this item is included in nep-ban, nep-dge, nep-fdg, nep-mac and nep-mon
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Related works:
Journal Article: MONETARY ASYMMETRIES WITHOUT (AND WITH) PRICE STICKINESS (2024)
Working Paper: Monetary asymmetries without (and with) price stickiness (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:cpm:dynare:081

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