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Monetary Asymmetries Without (And With) Price Stickiness

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  • IVAN JACCARD

Abstract

The evidence suggests that monetary policy transmission is asymmetric over the business cycle. Interacting financing frictions with a preference for liquidity provides an explanation for this fact. Our model reproduces a set of asset market and business cycle facts. Accounting for the joint dynamics of asset prices and business cycle fluctuations is key; in a variant of the model that is unable to produce realistic macrofinance implications, monetary asymmetries disappear. Resorting to nonlinear techniques is therefore not sufficient to detect monetary asymmetries. Nonlinearities in the transmission mechanism also critically depend on the macrofinance implications of monetary policy models.

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  • Ivan Jaccard, 2024. "Monetary Asymmetries Without (And With) Price Stickiness," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 1003-1047, May.
    • Handle: RePEc:wly:iecrev:v:65:y:2024:i:2:p:1003-1047
    DOI: 10.1111/iere.12677
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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