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

Renee Fry-McKibbin, Jasmine Zheng

    Research output: Contribution to journalArticle

    Abstract

    This article 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.
    Original languageEnglish
    Pages (from-to)5802-5823pp
    JournalApplied Economics
    Volume48
    Issue number59
    DOIs
    Publication statusPublished - 2016

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