State-dependent monetary policy transmission and financial market tensions
Sebastian Rüth ()
Economics Letters, 2017, vol. 157, issue C, 56-61
Is monetary policy more powerful when strains in the financial system are high? Applying local projections to US time series, I approach this question by allowing monetary policy shocks and its propagation to the broader economy to smoothly vary according to a measure of financial market tensions—the so-called excess bond premium (EBP). I find that monetary policy impacts macroeconomic, housing, and financial variables stronger and more persistently when financial frictions are high.
Keywords: Excess bond premium; Monetary policy; Local projections (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 G12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:157:y:2017:i:c:p:56-61
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