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THE TRANSMISSION MECHANISM IN GOOD AND BAD TIMES
Author(s) -
Mumtaz Haroon,
Surico Paolo
Publication year - 2015
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12136
Subject(s) - econometrics , economics , quantile , elasticity (physics) , quantile regression , mechanism (biology) , transmission rate , value (mathematics) , interest rate , transmission (telecommunications) , state dependent , statistics , mathematics , monetary economics , mathematical economics , computer science , telecommunications , philosophy , materials science , epistemology , composite material
Does the transmission of economic policies and structural shocks vary with the state of the economy? We answer this question using a strategy based on quantile regressions, which account for endogenous regressors and state‐dependent parameters. An application to U.S. real activity and interest rate reveals pervasive asymmetries in the propagation mechanism across good and bad times. During periods when real activity is above its conditional average, the estimates of the degree of forward‐lookingness and interest rate semi‐elasticity are significantly larger (in absolute value) than the estimates associated with below‐average periods. Results are robust to alternative strategies to model state‐dependent parameters.