Asymmetric effects of monetary policy in Brazil

In this paper, we check whether the effects of monetary policy actions on output in Brazil are asymmetric. Therefore, we estimate Markov-switching models that allow positive and negative shocks to affect the growth rate of output in an asymmetric fashion in expansion and recession states. In general, results show that: i) the real effects of negative monetary shocks are larger than those of positive shocks in an expansion; ii) in a recession, the real effects of positive and negative shocks are the same; iii) there is no evidence of asymmetry between the effects of countercyclical monetary policies; and iv) it is not possible to assert that the effects of a positive (or negative) shock are dependent upon the phase of the business cycle.

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Asymmetric Effects of Monetary Policy

The B E Journal of Macroeconomics ◽

10.1515/bejm-2020-0084 ◽

2020 ◽

Vol 0 (0) ◽

Author(s):

Tzu-Yu Lin

Keyword(s):

Monetary Policy ◽

Structural Vector Autoregression ◽

Dsge Model ◽

Monetary Policies ◽

Asymmetric Effects ◽

Collateral Constraints ◽

Us Economy ◽

Policy Shocks ◽

Dynamic Stochastic ◽

The Business Cycle

AbstractIn this paper, we first use a structural vector autoregression model to examine whether the US economy responds asymmetrically to expansionary and contractionary monetary policies. The empirical results show that monetary policy has significant asymmetric effects on output and investment. To provide an explanation of such asymmetries, we consider a nonlinear dynamic stochastic general equilibrium (DSGE) model in which collateral constraints are occasionally binding over the business cycle. The nonlinear DSGE model is able to match the empirical findings that macroeconomic aggregates react asymmetrically to positive and negative monetary policy shocks.

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Sectoral Effects of Monetary Policy: Evidence from Pakistan

The Pakistan Development Review ◽

10.30541/v45i4iipp.1103-1115 ◽

2006 ◽

Vol 45 (4II) ◽

pp. 1103-1115 ◽

Cited By ~ 8

Author(s):

Tasneem Alam ◽

Muhammad Waheed

Keyword(s):

Monetary Policy ◽

Transmission Mechanism ◽

Monetary Shocks ◽

Monetary Policy Shocks ◽

Monetary Policies ◽

Policy Makers ◽

Regional Effects ◽

Real Effects ◽

Policy Shocks ◽

Short Run

Does monetary policy have economically significant effects on the real output? Historically, economists have tended to hold markedly different views with regard to this question. In recent times, however, there seems to be increasing consensus among monetary economists and policy-makers that monetary policy does have real effects, at least in the short run.1 Consequently, focus of monetary policy analysis has recently shifted from the big question of whether money matters, to emphasising other aspects of monetary policy and its relations to real economic activity. One aspect that has received considerable attention of late is the sectoral or regional effects of monetary policy shocks. Recent studies on the subject make it quite clear that different sectors or regions of the economy respond differently to monetary shocks. This observation has profound implications for the macroeconomic management as the central bank will have to weigh the varying consequences of its actions on different sectors or regions of the economy. For instance, the tightening of monetary policy might be considered mild from the aggregate perspective, yet it can be viewed as excessive for certain sectors. If this is true then monetary policy should have strong distributional effects within the economy. Accordingly, information on which sectors react first and are more adversely affected by monetary tightening provides valuable information to monetary authorities in designing appropriate monetary policies. Additionally, the results can contribute to our understanding of the underlying nature of transmission mechanism. And for that reason, many economists have called for a disaggregated analysis of monetary transmission mechanism [e.g., Domac (1999), Dedola and Lippi (2005), Ganley and Salmon (1997), Carlino and DeFina (1998)].

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Heterogeneous Consumers, Segmented Asset Markets and the Real Effects of Monetary Policy

The Economic Journal ◽

10.1093/ej/ueaa010 ◽

2020 ◽

Vol 130 (628) ◽

pp. 1031-1056

Author(s):

Zeno Enders

Keyword(s):

Monetary Policy ◽

Aggregate Demand ◽

Negative Relationship ◽

Demand Elasticity ◽

Asset Markets ◽

Monetary Shocks ◽

Financial Variables ◽

Real Effects ◽

Countercyclical Markups ◽

Heterogeneous Consumers

Abstract This article proposes a novel mechanism by which changes in the distribution of money holdings have real aggregate effects. I develop a flexible-price model of segmented asset markets in which monetary policy influences the aggregate demand elasticity via heterogenous money holdings. Because varieties of consumption bundles are purchased sequentially, newly injected money disseminates slowly throughout the economy via second-round effects. The model predicts a short-term inflation-output trade-off, a liquidity effect, countercyclical markups, and pro-cyclical wages after monetary shocks. Among other correlations of financial variables, it also reproduces the empirical, negative relationship between changes in the money supply and markups.

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Business cycles and monetary policy asymmetry: An investigation using Markov-switching models

Physica A Statistical Mechanics and its Applications ◽

10.1016/j.physa.2007.02.063 ◽

2007 ◽

Vol 380 ◽

pp. 297-306 ◽

Cited By ~ 6

Author(s):

Siow-Hooi Tan ◽

Muzafar Shah Habibullah

Keyword(s):

Monetary Policy ◽

Business Cycles ◽

Markov Switching ◽

Markov Switching Models ◽

Switching Models

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Are the Effects of Monetary Policy Shocks Big or Small?

American Economic Journal Macroeconomics ◽

10.1257/mac.4.2.1 ◽

2012 ◽

Vol 4 (2) ◽

pp. 1-32 ◽

Cited By ~ 58

Author(s):

Olivier Coibion

Keyword(s):

Monetary Policy ◽

Monetary Policy Shocks ◽

Taylor Rules ◽

The Real ◽

Real Effects ◽

Policy Shocks ◽

Monetary Policy Shock ◽

Historical Contribution

This paper studies the small estimated effects of monetary policy shocks from standard VARs versus the large effects from the Romer and Romer (2004) approach. The differences are driven by three factors: the different contractionary impetus, the period of reserves targeting, and lag length selection. Accounting for these factors, the real effects of policy shocks are consistent across approaches and most likely medium. Alternative monetary policy shock measures from estimated Taylor rules also yield medium-sized real effects and indicate that the historical contribution of monetary policy shocks to real fluctuations has been significant, particularly during the 1970s and early 1980s. (JEL E32, E43, E52)

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