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Monetary Asymmetries without (and with) Price Stickiness

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  • Jaccard, Ivan

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 mechanism generates monetary asymmetries in a model that jointly 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 macro-finance implications, monetary asymmetries disappear. Our results suggest that asymmetries in the transmission mechanism critically depend on the macro-finance implications of monetary policy models, and that resorting to nonlinear techniques is not sufficient to detect monetary asymmetries.

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  • Jaccard, Ivan, 2024. "Monetary Asymmetries without (and with) Price Stickiness," Dynare Working Papers 81, CEPREMAP.
    • Handle: RePEc:cpm:dynare:081
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    More about this item

    Keywords

    Money Demand; Nonlinear Solution Methods; Asset Pricing in DSGE Models; Term Premium; Stochastic Discount Factor;
    All these keywords.

    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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