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Unconventional monetary policy reaction functions: evidence from the US

Studies in Nonlinear Dynamics and Econometrics, ISSN: 1558-3708, Vol: 24, Issue: 4
2020
  • 6
    Citations
  • 0
    Usage
  • 15
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    6
    • Citation Indexes
      6
  • Captures
    15

Conference Paper Description

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.

Bibliographic Details

Luca Agnello; Vitor Castro; Gilles Dufrénot; Fredj Jawadi; Ricardo M. Sousa

Walter de Gruyter GmbH

Mathematics; Social Sciences; Economics, Econometrics and Finance

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