cover_DP_2016-19.jpg

Time-varying Volatility, Financial Intermediation and Monetary Policy

We document that expansionary monetary policy shocks are less effective at stimulating output and investment in periods of high volatility compared to periods of low volatility, using a regime-switching vector autoregression. Exogenous policy changes are identified by adapting an external instruments approach to the non-linear model. The lower effectiveness of monetary policy can be linked to weaker responses of credit costs, suggesting a financial accelerator mechanism that is weaker in high volatility periods.

25. May 2016

Authors S. Eickmeier N. Metiu Esteban Prieto

Whom to contact

For Researchers

For Journalists

Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoWeltoffen Logo