Is there an asymmetric effect of monetary policy over time? A Bayesian analysis using Austrian data. |
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Authors: | Sylvia Kaufmann |
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Institution: | (1) Oesterreichische Nationalbank, Economic Analysis Division, P.O. Box 61, A-1011 Vienna, and University of Vienna, Department of Economics, Hohenstaufengasse 9, A-1010 Vienna (e-mail: sylvia.kaufmann@oenb.co.at), AT |
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Abstract: | The present paper assesses whether monetary policy effects are asymmetric over the business cycle by estimating a univariate
model for GDP including additionally the first difference of the 3-month Austrian interest rate as a measure for monetary
policy. The asymmetry of the effects is captured by allowing for state-dependent parameters where the latent state variable
follows a Markov switching process. The model is estimated within a Bayesian framework using Markov Chain Monte Carlo simulation
methods. Model selection and specification tests are performed by means of marginal likelihood. The results document significant
negative effects of monetary policy during periods of below-average growth, while the effect seems insignificant during periods
of normal or above-average growth. These results corroborate those derived in theoretical models assuming price rigidities
and implying a convex supply curve. Additionally, the concern of using appropriate state-identifying restrictions is raised
to obtain an unbiased posterior inference. Finally, the analysis concludes by assessing the robustness of the results with
respect to alternative measures of monetary policy.
First Version Received: December 2000/Final Version Received: May 2001 |
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Keywords: | : Asymmetry monetary policy Markov switching Markov Chain Monte Carlo marginal likelihood |
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