State-dependent monetary policy transmission and financial market tensions

Sebastian Rüth

Economics Letters, 2017, vol. 157, issue C, 56-61

Abstract: 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)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176517301866
Full text for ScienceDirect subscribers only

Related works:
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:eee:ecolet:v:157:y:2017:i:c:p:56-61

DOI: 10.1016/j.econlet.2017.05.008

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().