2019_online_Agnello_Castro_Dufrenot_Jawadi_Sousa_SNDE_unconv mon policy.pdf (912.04 kB)
Unconventional monetary policy reaction functions: evidence from the U.S.
journal contribution
posted on 2019-10-04, 11:08 authored by Luca Agnello, Vitor CastroVitor Castro, Gilles Dufrénot, Fredj Jawadi, Ricardo SousaWe 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.
Funding
National Funds of the FCT – Portuguese Foundation for Science and Technology within the project "UID/ECO/03182/2019"
French National Research Agency grant ANR-17-EURE-0020
History
School
- Business and Economics
Department
- Economics
Published in
Studies in Nonlinear Dynamics and EconometricsVolume
24Issue
4Pages
20180088Publisher
De GruyterVersion
- VoR (Version of Record)
Rights holder
© Walter de Gruyter GmbHPublisher statement
This paper is published in the journal Studies in Nonlinear Dynamics and Econometrics and is available at https://doi.org/10.1515/snde-2018-0088.Acceptance date
2019-10-03Publication date
2019-11-08Copyright date
2019ISSN
1558-3708Publisher version
Language
- en
Depositor
Dr Vitor CastroArticle number
20180088Usage metrics
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