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Some Additional Evidence from the Credit Channel on the Response to Monetary Shocks: Looking for Asymmetries ¤

By Fabio Alessandrini, Jean-pierre Danthine and Peter Kugler


The credit channel of monetary policy has both cross-sectional and timeseries implications for the reaction of the economy to monetary shocks. This paper focuses on the more rarely investigated time-series aspect and shows that the economy has varying sensitivity to monetary shocks over time. By using a Threshold VAR model, we …nd that output and credit spreads react much stronger to monetary shocks when cash ‡ows or dividends are low. This distinction in the regimes is in particular more signi…cant than one based on the stage of the business cycle or on the stance of monetary policy. In this sense, the response to a tightening for instance cannot be considered as constant and traditional impulse-response functions have to be taken with some caution

Topics: JEL classi…cation, C32, E51, E52 Keywords, credit channel, Threshold Vector Autoregression (TVAR, asymmetric responses
Year: 2003
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