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Asymmetric Effects of Money Supply Shocks and Trend Inflation

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  • Senda, Takashi

Abstract

This paper considers a possible explanation for the asymmetric effects of money supply shocks. Based on a sticky price theory, I derive the following two predictions: first, the relationship between trend inflation and the degree of asymmetry is not simply monotonic, instead, increases in inflation beyond some level can actually reduce the degree of asymmetry. Secondly, the degree of asymmetry is high in countries where the standard deviation of nominal GDP growth is high. I examine prewar and postwar data for OECD countries and find that the cross-country evidence supports both of these predictions.

Suggested Citation

  • Senda, Takashi, 2001. "Asymmetric Effects of Money Supply Shocks and Trend Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 65-89, February.
    • Handle: RePEc:mcb:jmoncb:v:33:y:2001:i:1:p:65-89
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    Cited by:

    1. Kandil, Magda, 2009. "Demand-side stabilization policies: What is the evidence of their potential?," Journal of Economics and Business, Elsevier, vol. 61(3), pages 261-276.
    2. Rather, Sartaj Rasool & Durai, S. Raja Sethu & Ramachandran, M., 2015. "Asymmetric price adjustment – evidence for India," The Journal of Economic Asymmetries, Elsevier, vol. 12(2), pages 73-79.
    3. Nicholas C.S. Sim, 2009. "Modeling Quantile Dependence: A New Look at the Money-Output Relationship," School of Economics and Public Policy Working Papers 2009-34, University of Adelaide, School of Economics and Public Policy.
    4. Seewon Kim, 2018. "Effects of Monetary Policy during Financial Market Crises and Regime Changes: An Empirical Evaluation Using a Nonlinear Vector Autoregression Model," Asian Economic Journal, East Asian Economic Association, vol. 32(2), pages 105-123, June.
    5. Gaffeo, E. & Petrella, I. & Pfajfar, D. & Santoro, E., 2010. "Reference-Dependent Preferences and the Transmission of Monetary Policy," Other publications TiSEM 23d33e54-e5c4-4ac3-b6c9-0, Tilburg University, School of Economics and Management.
    6. Cerqueira, Vinícius Dos Santos & Ribeiro, Márcio Bruno & Martinez, Thiago Sevilhano, 2014. "Propagação Assimétrica de Choques Monetários na Economia Brasileira: Evidências com base em um modelo vetorial não-linear de transição suave," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 68(1), April.
    7. Randall E. Parker & Philip Rothman, 2004. "An Examination of the Asymmetric Effects of Money Supply Shocks in the Pre--World War I and Interwar Periods," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 88-100, January.
    8. repec:fgv:epgrbe:v:68:n:1:a:2 is not listed on IDEAS
    9. Lo, Ming Chien & Piger, Jeremy, 2005. "Is the Response of Output to Monetary Policy Asymmetric? Evidence from a Regime-Switching Coefficients Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 865-886, October.
    10. Kilinc, Mustafa & Tunc, Cengiz, 2019. "The asymmetric effects of monetary policy on economic activity in Turkey," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 505-528.
    11. Serdar Ongan, Ismet Gocer, Ayse Ongan, 2022. "Revisiting the quantity theory of money in Euro Area: the case of Greece," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 19(1), pages 63-77, June.
    12. Raul Ibarra, 2016. "How important is the credit channel in the transmission of monetary policy in Mexico?," Applied Economics, Taylor & Francis Journals, vol. 48(36), pages 3462-3484, August.
    13. Velasco, Sofia, 2024. "Asymmetries in the transmission of monetary policy shocks over the business cycle: a Bayesian Quantile Factor Augmented VAR," Working Paper Series 2983, European Central Bank.
    14. Mun, Kyung-Chun, 2012. "The joint response of stock and foreign exchange markets to macroeconomic surprises: Using US and Japanese data," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 383-394.
    15. Sim, Nicholas & Zhou, Hongtao, 2015. "Oil prices, US stock return, and the dependence between their quantiles," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 1-8.
    16. Kishan, Ruby P. & Opiela, Timothy P., 2006. "Bank capital and loan asymmetry in the transmission of monetary policy," Journal of Banking & Finance, Elsevier, vol. 30(1), pages 259-285, January.
    17. khan, sajawal, 2018. "Business Cycle Fluctuations: why are so undesirable?," MPRA Paper 93172, University Library of Munich, Germany, revised 12 Jan 2019.
    18. Serdar Ongan, Ismet Gocer, Ayse Ongan, 2022. "Revisiting the quantity theory of money in Euro Area: the case of Greece," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 19(1), pages 63-77, June.

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