Monetary Asymmetries without (and with) Price Stickiness, I. Jaccard, IER
Principal Investigator(s): View help for Principal Investigator(s) Ivan Jaccard, European Central Bank
Version: View help for Version V1
| Name | File Type | Size | Last Modified |
|---|---|---|---|
| Replication-files | 09/15/2023 11:32:AM |
Project Citation:
Jaccard, Ivan. Monetary Asymmetries without (and with) Price Stickiness, I. Jaccard, IER. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2023-09-15. https://doi.org/10.3886/E193821V1
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Monetary Asymmetries without (and with) Price Stickiness
Evidence suggests that monetary policy transmission is asymmetric over the business cycle. Interacting financing frictions with a preference for liquidity provides an explanation for this fact. Our model reproduces a set of asset market and business cycle facts. Accounting for the joint dynamics of asset prices and business cycle fluctuations is key; in a variant of the model that is unable to produce realistic macro-finance implications, monetary asymmetries disappear. Resorting to nonlinear techniques is therefore not sufficient to detect monetary asymmetries. Nonlinearities in the transmission mechanism also critically depend on the macro-finance implications of monetary policy models.
Evidence suggests that monetary policy transmission is asymmetric over the business cycle. Interacting financing frictions with a preference for liquidity provides an explanation for this fact. Our model reproduces a set of asset market and business cycle facts. Accounting for the joint dynamics of asset prices and business cycle fluctuations is key; in a variant of the model that is unable to produce realistic macro-finance implications, monetary asymmetries disappear. Resorting to nonlinear techniques is therefore not sufficient to detect monetary asymmetries. Nonlinearities in the transmission mechanism also critically depend on the macro-finance implications of monetary policy models.
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