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Asymmetric Effects of Monetary Policy

Lin Tzu-Yu ()
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Lin Tzu-Yu: Department of Economics, National Cheng Kung University, No.1, University Road, Tainan City 701, Taiwan

The B.E. Journal of Macroeconomics, 2021, vol. 21, issue 2, 425-447

Abstract: In this paper, we first use a structural vector autoregression model to examine whether the US economy responds asymmetrically to expansionary and contractionary monetary policies. The empirical results show that monetary policy has significant asymmetric effects on output and investment. To provide an explanation of such asymmetries, we consider a nonlinear dynamic stochastic general equilibrium (DSGE) model in which collateral constraints are occasionally binding over the business cycle. The nonlinear DSGE model is able to match the empirical findings that macroeconomic aggregates react asymmetrically to positive and negative monetary policy shocks.

Keywords: asymmetric effects; monetary policy; occasionally binding constraint (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1515/bejm-2020-0084

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