Asymmetric Effects of Monetary Policy Shocks on Output Growth: Evidence from Nonlinear ARDL and Hatemi-J Causality Tests

Abstract

Previous studies relied on asymmetric or a linear approach while considering the output response of monetary policy shocks. However, empirical results based on the symmetric approach tend to have masked the true effects of monetary policy shocks. The present study, therefore, aims to probe the asymmetric impact of monetary policy shocks on the output growth of selected developing economies. The empirical results indicate significant evidence of asymmetric effect both in the short run and in the long in almost all countries. Furthermore,compared to contractionary monetary policy, the findings indicate that expansionary monetary policy shocks have a more profound impact on output growth. The asymmetry between monetary policy shocks and output response tends to have implications for the effectiveness of the economic policy, in particular in developing economies.Thus, it is recommended to consider these asymmetries while evaluating the impact of monetary policy on economic growth