Financial Depth and the Asymmetric Impact of Monetary Policy

Mustafa Caglayan (m.caglayan@hw.ac.uk), Ozge Kandemir Kocaaslan and Kostas Mouratidis

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the importance of financial depth in evaluating the asymmetric impact of monetary policy on real output over the course of the US business cycle. We show that monetary policy has a significant impact on output growth during recessions. We also show that financial deepening plays an important role by dampening the effects of monetary policy shocks in recessions. The results are robust to the use of alternative financial depth and monetary policy shock measures as well as to two different sample periods.

Keywords: Financial depth; financial frictions; monetary policy; output growth; asymmetric effects; Markov switching; instrumental variable (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 2016-08-01, Revised 2016-08
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Financial Depth and the Asymmetric Impact of Monetary Policy (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:75250

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