Asymmetric Effects of Monetary Policy in the U.S. and Brazil

Ioannis Pragidis (), Periklis Gogas and Benjamin Tabak

No 7-2013, DUTH Research Papers in Economics from Democritus University of Thrace, Department of Economics

Abstract: We empirically test the effects of anticipated and unanticipated monetary policy shocks on the growth rate of real industrial production and explicitly test for different types of asymmetries in monetary policy implementation for two major international economies, the U.S. and Brazil. We depart from the conventional method of VAR analysis to estimate unanticipated monetary shocks and instead we use a combination of other methods. We first identify the Taylor rule that best describes the reaction of both central banks and then we test both forward looking linear and nonlinear models concluding that a Logistic Smooth Transition Autoregressive (LSTAR) forward looking model of the Taylor rule best describes the US FED Funds rate while a linear Taylor rule with the inclusion of a dummy variable best describes the reaction of the Central Bank of Brazil (BCB). We then use in-sample forecast errors in order to derive or identify the unexpected monetary shocks for both countries. In line with Cover (1992), we use these shocks to explore any asymmetries in the conduct of monetary policy on the growth rate of real industrial production. We also find asymmetries between anticipated and unanticipated monetary shocks as well as between effects of positive and negative shocks.

Keywords: Taylor rule; monetary policy; nonlinear effects; LSTAR (search for similar items in EconPapers)
JEL-codes: E40 E52 E58 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2013-12-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Asymmetric effects of monetary policy in the U.S and Brazil (2018)
Working Paper: Asymmetric Effects of Monetary Policy in the U.S. and Brazil (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:duthrp:2013_007

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