Unconventional monetary policy reaction functions: evidence from the US

Agnello Luca, Vitor Castro, Gilles Dufrénot (), Fredj Jawadi and Ricardo Sousa
Additional contact information
Agnello Luca: University of Palermo, Department of Economics, Business and Statistics (SEAS), Viale delle Scienze, 90128 Palermo, Italy

Studies in Nonlinear Dynamics & Econometrics, 2020, vol. 24, issue 4, 18

Abstract: We specify unconventional monetary policy reaction functions for the Fed using linear and nonlinear econometric frameworks. We find that nonstandard policy measures are largely driven by the dynamics of inflation and the output gap, with the effect being particularly strong during QE rounds. Moreover, we uncover the presence of asymmetry and regime dependence in central bank’s actions since the global financial crisis, especially concerning the response of the term spread and the shadow short rate to the growth rate of central bank reserves. From a policy perspective and given the lack of a systematic response of monetary policy to asset price growth in nonstandard times, our findings seem to corroborate the view that concerns about asset price bubbles, financial sector pro-cyclicality and systemic risk should be part of the macro-prudential policy toolkit.

Keywords: asset prices; central bank reserves; inflation; nonlinear models; output gap; shadow short rate; term spread; unconventional monetary policy reaction function (search for similar items in EconPapers)
JEL-codes: E21 E43 E51 E53 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1515/snde-2018-0088 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: Unconventional monetary policy reaction functions: evidence from the US (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:sndecm:v:24:y:2020:i:4:p:18:n:3

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/snde/html

DOI: 10.1515/snde-2018-0088

Access Statistics for this article

Studies in Nonlinear Dynamics & Econometrics is currently edited by Bruce Mizrach

More articles in Studies in Nonlinear Dynamics & Econometrics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().