Asymmetric Effects Of Monetary Policy Research Articles

Asymmetric Effects of Monetary Policy on Firms

AbstractThis paper documents firm‐level evidence on the asymmetric effects of monetary policy in the United States. Focusing on the 1980q3–2019q4 period, I find that monetary tightenings show larger effects on firms' employment and sales than monetary easings. In comparison, investment rate does not generate significant asymmetry in response to sign‐dependent monetary policy shocks. I interpret these findings in the context of downward nominal wage rigidity and investment irreversibility channels. Furthermore, I exploit cross‐sectional variation and show that employment of small, nondividend payer, low credit rating, and young firms displays larger contractions in response to a monetary tightening.

The asymmetric effect of monetary policy on core inflation in Jordan: NARDL model

This study aimed to estimate the asymmetric impact of monetary policy on core inflation rates in Jordan during the period 2000-2020 using the Nonlinear Autoregressive Distributed Lag Model (NARDL) Based on quarterly data. The unit root tests showed the different degrees of integration by applying the Augmented Dickey-Fuller Test (ADF) and Philip Perron (P.P). and has a cointegration relationship using Johansson's test, and the Bound test. Also, there is a nonlinear relationship in the time series using waled test. The study used Core Inflation (CORINF) as a dependent variable (calculated based on excluding energy and food prices method) and the overnight deposit rate (CBJR), the loan and advances interest rate (LR), the growth in money supply (GM2), and the growth in real GDP (GRGDP) used as independent variables. The results indicated that there are asymmetric effects of both CBJR and GM2 on core inflation, as a 1% increase in GM2 leads to an increase in the CORINF by 1.3%, while its decrease by 1% leads to a decrease in the CORINF by 1.2%, in contrast, an increase in the LR by 1% leads to a decrease in the CORINF by 0.15% and a decrease by 1% leads to a rise in the CORINF by 0.44%, and the study also found that a rise in LR by 1% lead to a decrease in the CORINF by 0.43%, while its decrease by 1% leads to a rise in the CORINF by 0.44%.

Asymmetric Effect of Monetary Policy on Asset Prices: Contractionary VS Expansionary Regimes

This research study seeks to investigate the asymmetrical impact of monetary policy on asset prices (stock price and house prices as indicators of asset prices). Understanding this asymmetry is crucial for policymakers and central banks to evaluate the implications of expansionary and contractionary monetary policies on asset price dynamics. The study examines both interest rates and the money supply, which are key tools of monetary policy, to determine if they have similar effects on asset prices across various economic regimes in 51 countries with diverse income levels for the period of 2009 to 2021. Using a linear and non-linear ARDL (NARDL) approach this study analyze the short-run and long-run impacts of monetary policy on stock and house prices, besides comparing the symmetric and asymmetric impacts of monetary policy shocks on these prices. The outcomes accentuate the importance of policymakers being cognizant of the impacts of different policy regimes on asset prices. Notably, the study reveals a significant and negative short-term impact of interest rates on asset prices under contractionary monetary policy. Conversely, expansionary monetary policy does not demonstrate a significant short-term effect on asset prices. This study makes substantial contributions by deepening insights into the efficacy of monetary policy, offering practical guidance for policymakers, and addressing a pivotal void in the extant scholarly discourse.

Role of Monetary Policy in Asset Price Inflation: A Comparative Study of Developed and Developing Economies

This study examined the relationship between monetary policy and asset price inflation in developed and developing economies, focusing on Pakistan. Using data from 2010-2024, the research employed multivariate GARCH and causality models to analyze the impact of various monetary policy tools on stock market indices and real estate prices. The findings revealed significant differences in economic policy's transmission mechanisms and effectiveness in influencing asset prices between developed and developing economies. In Pakistan, interest rate changes were found to have a more pronounced effect on stock market volatility than real estate prices. The study also highlighted the challenges developing economies face in implementing effective monetary policies to manage asset price inflation without compromising economic growth. This research is particularly important as it provides crucial insights for policymakers in developing economies like Pakistan, where the interplay between monetary policy and asset prices can have significant implications for financial stability and economic growth. By identifying the asymmetric effects of monetary policy and the role of policy uncertainty, this study contributes to developing more effective and targeted policy interventions in emerging markets.

Regime-Switching Structural Vector Autoregression Identified by Sign Restrictions: Asymmetric Effects of Monetary Policy Revisited

Regime-Switching Structural Vector Autoregression Identified by Sign Restrictions: Asymmetric Effects of Monetary Policy Revisited

Asymmetric effects of monetary policy on non-bank financial intermediation (NBFI) assets: a panel quantile regression approach

PurposeThe purpose of this paper is to fill the momentous gap by explicitly investigating the asymmetric effects of monetary policy (MP) on non-bank financial intermediation (NBFI) assets.Design/methodology/approachThe authors utilized panel data from 29 countries for the period of 2012–2020 and used the quantile regression estimation. In addition to simultaneous quantile regression (SQR), the authors also employ quantile regression with clustered data (Parente and Silva, 2016) and the generalized quantile regression (GQR) method (Powell, 2020).FindingsThe empirical results show a significant heterogeneous impact of MP. While there is a positive relationship between MP and NBFI assets (“waterbed effect”) at lower quantiles of NBFI assets, at middle and higher quantiles, MP has a negative impact on NBFI assets (“search for yield” effect). The authors further find that negative impact strengthens as the quantile levels of NBFI assets rise from mid to high. Findings also reveal that “procyclicality” (except higher quantile) and “institutional demand” hypotheses hold. However, regarding “regulatory arbitrage,” mixed results are observed indicating the impact of Basel III requirements.Originality/valuePrevious empirical studies have concentrated on either the Dynamic Stochastic General Equilibrium (DSGE) framework or conditional mean regression approaches and delivered mixed findings of the MP effects on NBFI. The current paper takes a step toward dealing with this issue by deploying quantile regression methodology, which shows the impact of MP on NBFI at different conditional distributions (quantiles) of NBFI assets instead of just NBFI's conditional mean distribution.

Asymmetric effects of monetary policy: evidence from India

Asymmetric effects of monetary policy: evidence from India

Asymmetric effects of monetary policy and financial accelerator: Evidence from India

This paper analyzes the asymmetric effects of monetary policy shocks during low and high financial stress regimes in India. We explore the asymmetric effects through various monetary policy transmission channels, namely, interest rate, credit, asset prices, exchange rate, and expectations channels, using threshold vector autoregression (TVAR) models. Financial Stress Index (FSI) is used in the TVAR estimations as the threshold variable that endogenizes the regime-switching. We use a compressive FSI based on the dynamic conditional correlation-generalized autoregressive conditional heteroscedasticity (DCC-GARCH) method. The empirical findings indicate that a contractionary monetary policy shock through various channels has a stronger and more persistent effect on macroeconomic goal variables, output, and inflation during high financial stress than in a low financial stress regime. An expansionary monetary policy shock also shows a more significant effect on output during a high financial stress regime. Also, we found a stronger financial accelerator effect during high financial stress. This finding supports the literature that argues for the emergence of a stronger financial accelerator effect during financial stress. Finally, using nonlinear historical decompositions, we find that interest rate shocks contribute significantly to macroeconomic fluctuations in India.

Downward Nominal Wage Rigidity and Asymmetric Effects of Monetary Policy

Downward Nominal Wage Rigidity and Asymmetric Effects of Monetary Policy

Asymmetric Effects of Monetary Policy on Commercial Banks Deposits in Iraq

This study propose and test a new channel for the transmission of monetary policy, when monetary policy changes banks respond to the interest they charge on deposits and affects directly on the size of banks deposits and, thus, affects lending power of commercial banks. Given this issue in mind, this study examines the asymmetric effects of monetary policies on commercial banks deposits in Iraq. The study applied Unit root test, Nonlinear autoregressive distributed lag (NARDL) approach, Error correction model (ECM), Bound test and Wald test using monthly data spanning from Jan 2005 to Dec 2019. Policy Interest Rate (IR), Cash Reserve Requirement (RR), and Broad Money Supply (M2) were used to proxy the monetary policies. Bank Deposit (BD), were used as the proxy of the Iraqi commercial banks deposit. The findings of NARDL show a non-linear relationship between monetary policies and Banks deposit. Furthermore, the results of Bound test and ECM confirmed the existence of the long run and short run relation between monetary policies and commercial banks deposit in Iraq. Finally, the result of Wald test indicates that policy interest rate and reserve requirement has asymmetric effect on banks deposit, while money supply has symmetric effect. Hence, it is suggested that policy makers in Iraq should consider the positive and negative shocks of monetary policy as commercial banks respond asymmetrically to the monetary policy Instruments.

Asymmetric Effects of Monetary Policy in Regional Housing Markets

The responsiveness of house prices to monetary policy shocks depends on the nature of the shock—expansionary versus contractionary—and on local housing supply elasticities. These findings are established using a panel of 263 US metropolitan areas. Expansionary monetary policy shocks have a larger impact on house prices in supply-inelastic areas. Contractionary shocks are orthogonal to housing supply elasticities. In supply-elastic areas, contractionary shocks have a greater impact on house prices than expansionary shocks do. The opposite holds true in supply-inelastic areas. We attribute this to asymmetric housing supply adjustments. (JEL E32, E43, E52, R21, R31)

Asymmetric Effect of Monetary Policy on Housing Price from Short-Term and Long-Term Perspectives

This study uses two main monetary policy tools, the real interest rate and M2, to investigate and analyze the correlation between monetary policy tools and housing prices. The sample period runs from 2006 to 2021 and the data frequency is monthly. The analysis explores the effects of the real interest rate and M2 on real estate prices through the integration of short- and long-term perspectives. The findings show that the real interest rate has no asymmetric effect on housing prices in the short term, but has a significant asymmetric effect in the long term. Monetary supply is asymmetric in both the short and long terms. In the short term, monetary supply tools are invalid for adjusting housing prices, while increasing the real interest rate could inhibit the rise in housing prices; in the long term, decreasing the real interest rate and monetary supply could inhibit the rise in housing prices.

Asymmetric effect of monetary policy on Indian stock market sectors: Do monetary policy stimulus transpire the same effect on all sectors?

Asymmetric effect of monetary policy on Indian stock market sectors: Do monetary policy stimulus transpire the same effect on all sectors?

Asymmetric Effects of Monetary Policy on Firms

Asymmetric Effects of Monetary Policy on Firms

The Asymmetric Effects of Monetary Policy: Evidence from the United Kingdom*

AbstractIn this paper, I analyse how the response of the UK economy to monetary policy shocks depends on the state of the economy, or the sign or size of the shock. Monetary policy shocks are identified by extending the Cloyne and Hürtgen (2016) approach to allow for time variation in the central bank reaction function. These shocks are used to estimate impulse responses by local projections to investigate asymmetries in the transmission mechanism. The main result is that shocks that occur during economic booms have significantly larger effects than those that occur during recessions. In addition, I find that expansionary shocks are more powerful than contractionary shocks, and that large shocks have a proportionally weaker effect on output than small shocks. The results are robust to alternative monetary policy shock identification methods and variations in the empirical specification.

Asymmetric effects of monetary policy and output shocks on the real estate market in China

The real estate market is essential for promoting economic growth, and it plays an important role in the transmission mechanism of monetary policy in China. In this study, we apply a smooth transition vector autoregression model to investigate the asymmetrical effects of monetary policy and output on the real estate market. The empirical results verify the effectiveness of the monetary policy based on the real estate market and the asymmetrical effects of monetary policy and output on the real estate market. In addition, the smaller response of the real estate market to output in a low-speed growth regime means that negative shocks (e.g., COVID-19) from output have weak effects on the real estate market. Finally, monetary policy has bigger positive effects on the real estate market in a low-speed growth regime; thus, quantitative easing monetary policy can effectively stimulate China's real estate market at present.

Asymmetric effects of monetary policy in Russia

We analyze the heterogeneous influence that monetary policy has on the growth rates of real personal income in 79 Russian regions over the period from 2Q2015 to 4Q2019, taking into account some of the channels of monetary policy transmission mechanism and spatial effects. The analysis was performed on the basis of panel data and a spatial autoregressive model. Besides that, we have calculated individual direct effects of changes of the interest rate for each region. Our results confirm the existence of a negative relationship between changes in the interest rate and growth rates of real personal income. This relationship is heterogeneous for different regions. Among the significant factors affecting the heterogeneity of the influence of monetary policy are the industrial structure and concentration of small businesses in regional economies. We have also found significant positive spatial effects of neighboring regions on each other. Our results generally coincide with those received in analyses of the effects of monetary policy in other countries.

Monetary policy and household net worth

This paper investigates the interrelation between household balance sheets, collateral constraints, and monetary policy. Using data on the U.S. economy, we estimate a monetary DSGE model with financial frictions and occasionally binding borrowing constraints. The model implies stronger effects of monetary policy interventions when the borrowing constraint is binding compared to situations when it turns slack. In a prediction analysis we find that, out of a set of alternative plausible endogenous model variables, the level of household net worth is the single best predictor of the tightness of the borrowing constraint, which implies that monetary policy is more effective when household net worth is low. We test this model prediction in the data and provide robust empirical evidence on asymmetric effects of monetary policy across the household net worth cycle that validates the model predictions. A contractionary monetary policy shock leads to a large and significant fall in economic activity during periods of low household net worth. In contrast, monetary policy shocks have only small and mostly insignificant effects when net worth is high.

Asymmetric Effects of Monetary Policy on the Armenian Economy

Whether inflation and output respond symmetrically or asymmetrically to the same size of contractionary and expansionary monetary policy shock has important policy implications. This paper shows the presence of asymmetric responses in Armenian inflation and output to positive and negative monetary policy shocks of the same size by employing econometric models. Contractionary policy decreases inflation less than expansionary policy increases it. Output reacts in the opposite way. An estimated small open economy DSGE model with sticky wages and investment adjustment costs explains about half of the asymmetry observed in the monetary policy transmission mechanism. This paper finds that the main part of inflation reaction asymmetry is a result of a highly convex Phillips curve for the importers. The nonlinearities of the internal economy explain the predominant part of the asymmetry in output reaction.

Asymmetric Effects of Monetary Policy

Abstract In this paper, we first use a structural vector autoregression model to examine whether the US economy responds asymmetrically to expansionary and contractionary monetary policies. The empirical results show that monetary policy has significant asymmetric effects on output and investment. To provide an explanation of such asymmetries, we consider a nonlinear dynamic stochastic general equilibrium (DSGE) model in which collateral constraints are occasionally binding over the business cycle. The nonlinear DSGE model is able to match the empirical findings that macroeconomic aggregates react asymmetrically to positive and negative monetary policy shocks.