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Financial Depth and the Asymmetric Impact of Monetary Policy
Author(s) -
Caglayan Mustafa,
Kandemir Kocaaslan Ozge,
Mouratidis Kostas
Publication year - 2017
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12160
Subject(s) - monetary policy , recession , economics , business cycle , monetary economics , shock (circulatory) , sample (material) , credit channel , macroeconomics , inflation targeting , medicine , chemistry , chromatography
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.