Effects of US monetary policy shocks during financial crises - A threshold vector autoregression approach

Renee Fry-McKibbin and Jasmine Zheng

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper analyzes the impact of monetary policy during periods of low and high financial stress in the US economy using a Threshold Vector Autoregression model. There is evidence that expansionary monetary policy is effective during periods of high financial stress with larger responses having a higher proportionate effect on output. The existence of a cost channel effect during periods of high financial stress implies the existence of a short run output-inflation trade off during financial crises. Large expansionary monetary shocks also increase the likelihood of moving the economy out of a high financial stress regime.

Keywords: Monetary policy; financial stress; threshold vector autoregression models (search for similar items in EconPapers)
JEL-codes: E44 E52 F44 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2016-05
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac and nep-mon
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Effects of the US monetary policy shocks during financial crises – a threshold vector autoregression approach (2016)
Working Paper: Effects of US Monetary Policy Shocks During Financial Crises - A Threshold Vector Autoregression Approach (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2016-25

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