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Symmetric or asymmetric? Monetary policy and Polish economy reactions over the business cycle

Author

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  • Jan Przystupa

    (Narodowy Bank Polski)

Abstract

In the paper, we examine whether monetary policy and reactions of the economy to monetary policy are symmetric over the business cycle. Not only do we study the differences between prosperity and slump, but also between all the phases of the business cycle, i.e. recovery, expansion, recession and depression. Moreover, we analyse reactions in all points of the business cycle. We find asymmetry in the reactions of monetary policy for the output gap close to zero, but the result disappears in a shorter sample. The effects of monetary policy are symmetric for the output gap between -2.0% and 1.5%. The asymmetry appears with the output gap getting closer to its extreme values. This result is robust across various samples.

Suggested Citation

  • Jan Przystupa, 2019. "Symmetric or asymmetric? Monetary policy and Polish economy reactions over the business cycle," Bank i Kredyt, Narodowy Bank Polski, vol. 50(4), pages 375-410.
    • Handle: RePEc:nbp:nbpbik:v:50:y:2019:i:4:p:375-410
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    More about this item

    Keywords

    monetary policy; business cycle; semi-structural model; non-linearity;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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