This paper investigates the nonlinear interaction of the monetary transmission mechanism and economic uncertainty in the United States. I employ a Threshold VAR model with two states dependent on the level of uncertainty, and identify regime specific shocks using sign-restrictions. Results suggest that the short run contraction induced by the policy shock is larger when uncertainty is high, however, in such times, its impact dissipates more quickly. Comparatively in low uncertainty times, the contraction is smaller with policymakers having a smoother control over the path the economy takes. The short-run larger impact can be leveraged to reduce inflation in a more cost-effective way, however the uncerlying cause of uncertainty needs to be carefully considered.
-
Notifications
You must be signed in to change notification settings - Fork 1
peterhorvath97/uncertainty_transmission_us
This commit does not belong to any branch on this repository, and may belong to a fork outside of the repository.
Folders and files
Name | Name | Last commit message | Last commit date | |
---|---|---|---|---|
Repository files navigation
About
Research project: The Impact of Uncertainty on Monetary Transmission - Evidence from the US
Topics
Resources
Stars
Watchers
Forks
Releases
No releases published
Packages 0
No packages published