Discussion paper

DP15005 Asymmetric Effects of Monetary Policy Easing and Tightening

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.


Forni, M, D Debortoli, L Gambetti and L Sala (2020), ‘DP15005 Asymmetric Effects of Monetary Policy Easing and Tightening‘, CEPR Discussion Paper No. 15005. CEPR Press, Paris & London. https://cepr.org/publications/dp15005