The transmission mechanism in good and bad times

Surico, P and Mumtaz, H (2015) The transmission mechanism in good and bad times. International Economic Review, 56 (4). pp. 1237-1260. ISSN 0020-6598

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Does the transmission of economic policies and structural shocks vary with the state of the economy? We answer this question using a strategy based on quantile regressions, which account for both endogeneous regressors and state-dependent parameters. An application to U.S. real activity and interest rate reveals pervasive asymmetries in the propagation mechanism of economic disturbances across good and bad times. During periods in which real activity is above its conditional average, the estimates of the degree of forward-lookingness and interest rate semi-elasticity are significantly larger (in absolute value) than the estimates associated with below-average periods. Results are robust to alternative estimation strategies to model state-dependent parameters.

Item Type: Article
Additional Information: © 2015 John Wiley & Sons, Inc.
Subject Areas: Economics
DOI: 10.1111/iere.12136
Date Deposited: 02 Mar 2016 18:51
Last Modified: 19 Oct 2017 10:25

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