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Are the Effects of Monetary Policy Asymmetric?
Author(s) -
Garcia René,
Schaller Huntley
Publication year - 2002
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/40.1.102
Subject(s) - recession , economics , monetary policy , interest rate , monetary economics , keynesian economics
By building on the Hamilton (1989) Markov switching model, we examine questions like: Does monetary policy have the same effect in expansions and recessions? Given that the economy is currently in a recession, does a fall in interest rates increase the probability of an expansion? Does monetary policy have an incremental effect on the growth rate within a given state, or does it only affect the economy if it is sufficiently strong to induce a state change (e.g., from recession to expansion)? As suggested by models with sticky prices or finance constraints, interest rate changes have larger effects during recessions.