The asymmetric effects of monetary policy on the business cycle: Evidence from the panel smoothed quantile regression model

Abstract

This paper uses a panel smoothed quantile regression model to examine the asymmetric effects of monetary policy on the business cycle by using data for 40 countries from 2005 to 2016. The empirical results show that monetary policy is pro-cyclical and amplifies the business cycle. The positive effects of monetary policy are larger in the emerging countries and are larger during economic expansions than recessions. The findings are robust to alternative panel quantile regression methods. This paper contributes to the exploration of distinct roles of monetary policy can play in the different phases of the business cycle.