EconPapers    
Economics at your fingertips  
 

Macroeconomic reversal rate: evidence from a nonlinear IS-curve

Jan Willem End (), Paul Konietschke, Anna Samarina () and Irina Stanga

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: This paper examines the link between interest rates and expenditures, known as the IS-curve. Specifically, we analyse whether the reaction of spending behaviour to monetary policy changes is different in a low compared to a normal interest rate environment. We estimate the nonlinear IS-curve for the euro area and the five largest euro area countries over the period 1999q2-2019q1 and study whether the IS-curve relationship is regime-dependent. We employ smooth-transition local projections to estimate the impulse responses of the output gap, the growth of consumption, investment, and savings to a contractionary monetary policy shock under normal and low interest rate regimes. Our results point to a possible flattening of the IS-curve, related to substitution effects becoming weaker relative to income effects in a low interest rate regime.

Keywords: IS-curve; monetary policy; low interest rate environment (search for similar items in EconPapers)
JEL-codes: E21 E22 E43 E52 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.dnb.nl/en/binaries/Working%20paper%20No.%20684_tcm47-388706.pdf

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:dnb:dnbwpp:684

Access Statistics for this paper

More papers in DNB Working Papers from Netherlands Central Bank, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Richard Heuver ().

 
Page updated 2020-11-28
Handle: RePEc:dnb:dnbwpp:684