We specify unconventional monetary policy reaction functions for the Fed using linear and nonlinear econometric frameworks. We find that nonstandard policy measures are largely driven by the dynamics of inflation and the output gap, with the effect being particularly strong during QE rounds. Moreover, we uncover the presence of asymmetry and regime dependence in central bank's actions since the global financial crisis, especially concerning the response of the term spread and the shadow short rate to the growth rate of central bank reserves. From a policy perspective and given the lack of a systematic response of monetary policy to asset price growth in nonstandard times, our findings seem to corroborate the view that concerns about asset price bubbles, financial sector pro-cyclicality and systemic risk should be part of the macro-prudential policy toolkit.

Agnello L., Castro V., Dufrenot G., Jawadi F., Sousa R.M. (2020). Unconventional monetary policy reaction functions: Evidence from the US. STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS, 24(4), 1-18 [10.1515/snde-2018-0088].

Unconventional monetary policy reaction functions: Evidence from the US

Agnello L.;
2020-01-01

Abstract

We specify unconventional monetary policy reaction functions for the Fed using linear and nonlinear econometric frameworks. We find that nonstandard policy measures are largely driven by the dynamics of inflation and the output gap, with the effect being particularly strong during QE rounds. Moreover, we uncover the presence of asymmetry and regime dependence in central bank's actions since the global financial crisis, especially concerning the response of the term spread and the shadow short rate to the growth rate of central bank reserves. From a policy perspective and given the lack of a systematic response of monetary policy to asset price growth in nonstandard times, our findings seem to corroborate the view that concerns about asset price bubbles, financial sector pro-cyclicality and systemic risk should be part of the macro-prudential policy toolkit.
www.degruyter.com/view/j/snde
Agnello L., Castro V., Dufrenot G., Jawadi F., Sousa R.M. (2020). Unconventional monetary policy reaction functions: Evidence from the US. STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS, 24(4), 1-18 [10.1515/snde-2018-0088].
File in questo prodotto:
File Dimensione Formato  
[15583708 - Studies in Nonlinear Dynamics & Econometrics] Unconventional monetary policy reaction functions_ evidence from the US.pdf

Solo gestori archvio

Tipologia: Versione Editoriale
Dimensione 892.34 kB
Formato Adobe PDF
892.34 kB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10447/388309
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 3
  • ???jsp.display-item.citation.isi??? 4
social impact