Loss aversion and the asymmetric transmission of monetary policy |
| |
| Affiliation: | 1. University of Copenhagen, Denmark and Catholic University of Milan, Italy;2. Birkbeck, University of London, CEPR, United Kingdom;3. CentER, EBC, University of Tilburg, The Netherlands;4. University of Trento, Italy;1. University of Michigan, USA;2. NBER, USA;1. Sao Paulo School of Economics-FGV, Brazil;2. Michigan State University, United States;1. Department of Economics and CIREQ, Université de Montréal, C.P. 6128, succ. Centre-Ville, Montréal, Québec, Canada H3C 3J7;2. Trade Policy Review Division, World Trade Organization, Rue de Lausanne 154, 1211 Geneva, Switzerland;1. Banco de Portugal, R. Francisco Ribeiro, 2, 1150-165 Lisboa, Portugal;2. Catolica Lisbon School of Business & Economics, Portugal;3. CEPR, United Kingdom;1. Office of Financial Stability, Federal Reserve Board, 20th and C Streets NW, Washington, DC 20551, United States;2. Division of International Finance, Federal Reserve Board, 20th and C Streets NW, Washington, DC 20551, United States |
| |
| Abstract: | There is widespread evidence that monetary policy exerts asymmetric effects on output over contractions and expansions in economic activity, while price responses display no sizeable asymmetry. To rationalize these facts we develop a dynamic general equilibrium model where households’ utility depends on consumption deviations from a reference level below which loss aversion is displayed. State-dependent degrees of real rigidity and elasticity of intertemporal substitution in consumption generate competing effects on output and inflation. Contractions face the Central Bank with higher responsiveness of output to interest rate changes, as well as a flatter aggregate supply schedule. |
| |
| Keywords: | Asymmetry Monetary policy Business cycle Prospect theory |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
