The Asymmetric Effects of Monetary Policy in the Euro Area

Glenn Abela, Arianna Antezza, Alissa Gorelova, Gianmarco Meta and Roberta Montebello

No 2165, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We study sign asymmetry in the effect of conventional monetary policy on key real macroeconomic variables in the euro area, using monthly data ranging from 2002 until 2022. We make use of local projections with state-dependence coming from the sign of the monetary policy shock, employing shocks identified using high-frequency identification. Our baseline findings suggest that there are asymmetries in the response of real variables to contractionary and expansionary monetary policy shocks. Furthermore, we investigate the potential sources of asymmetry by clustering countries that present similarities in proxies of labour, financial and housing markets, respectively. We find results that are consistent with theoretical predictions that downward nominal wage rigidities, sectoral composition of the economy, firm sizes as well as the housing market and housing debt conditions all contribute to the sign asymmetries we uncover in our baseline results.

Keywords: Monetary economics; central banking; high-frequency identification; asymmetries (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 45 p.
Date: 2026
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