Asymmetric Effects of Monetary Policy Easing and Tightening
CEPR Discussion Paper No. DP15005
39 Pages Posted: 28 Jul 2020 Last revised: 16 Aug 2020
Date Written: July 2020
Abstract
Monetary policy easing and tightening have asymmetric effects: a policy easing has large effects on prices but small effects on real activity variables. The opposite is found for a policy tightening: large real effects but small effects on prices. Nonlinearities are estimated using a new and simple procedure based on linear Strutural Vector Autoregressions with exogenous variables (SVARX). We rationalize the result through the lens of a simple model with downward nominal wage rigidities.
Keywords: monetary policy shocks, nonlinear effects, structural VAR models
JEL Classification: C32, E32
Suggested Citation: Suggested Citation