The effectiveness of monetary policy and output fluctuations: An asymmetric analysis
Australian Economic Papers, 2020, vol. 59, issue 2, 161-181
Previous studies have investigated asymmetries in the effects of monetary policy on the real economic activity by using either vector autoregressive (VAR)‐based regime‐switching models with smooth transition technique or Gaussian functions to parameterise the dynamic effects of structural shocks on the economy. These kinds of VAR models assume asymmetry as a short‐run relationship between the series since the long‐run neutrality hypothesis of money states that monetary policy can only affect productive capacity of the economy in the short run, but not in the long run. The recent theoretical literature shows that this hypothesis is not quite right. Thus, this paper examines the extent to which monetary policy has a long‐run asymmetric effect on output in a number of Organisation for Economic Co‐operation and Development countries by using a nonlinear hidden cointegration analysis within a likelihood‐based panel framework. The findings indicate that there is a long‐run relationship between the real interest rate as an indicator of monetary policy and the growth rate of real output in five countries out of nine under review. This gives support for the view that output has responded asymmetrically to the real interest rate changes. The economic implication of our results is that monetary policy affects positive and negative output fluctuations differently.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:59:y:2020:i:2:p:161-181
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0004-900X
Access Statistics for this article
Australian Economic Papers is currently edited by Daniel Leonard
More articles in Australian Economic Papers from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().