DP15005 Asymmetric Effects of Monetary Policy Easing and Tightening
|Author(s):||Davide Debortoli, Mario Forni, Luca Gambetti, Luca Sala|
|Publication Date:||July 2020|
|Keyword(s):||monetary policy shocks, nonlinear effects, structural VAR models|
|Programme Areas:||Monetary Economics and Fluctuations|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=15005|
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.