Asymmetric Effects of Monetary Policy in the United States

By Morten O. Ravn, M. Solá. 2004

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This paper tests for the presence of asymmetric effects of monetary policy on output. The asymmetries that the authors examine are related to the size and sign of monetary policy shocks and are based on economic theory. Using M1 as the basis for measuring monetary policy shocks, they find evidence in line with previous evidence of larger real effects resulting from positive shocks than from negative shocks—although the authors cannot reject symmetry either. However, using the federal funds rate instead, a measure that is more closely related to the actual conduct of monetary policy, they find that only small negative shocks affect real aggregate activity. The results are interpreted in terms of menu-cost models.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/644dfa014bef2cb2903d6ce59de89bb65f8fc6bd