Monetary policy transmission over the leverage cycle: Evidence for the euro area

Arbeitspapier

We study state dependence in the impact of monetary policy shocks over the leverage cycle for a panel of 10 euro area countries. We use a Bayesian Threshold Panel SVAR with regime classifications based on credit and house prices cycles. We find that monetary policy shocks trigger a smaller response of GDP, but a larger response of in ation during low states of the cycle. The shift in the inflation-output trade-off may result from higher macro-economic uncertainty in low leverage states. For an alternative regime classification based on turning points we find larger effects on GDP during contractions.

Object Details

• ISBN: 978-92-899-4064-1
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2421

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy
• Subject: Monetary Policy ; Financial Cycle ; Bayesian Threshold Panel VAR

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bräuer, Leonie ; Rünstler, Gerhard
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2020

Further information

• DOI: doi:10.2866/349021
• Handle: http://hdl.handle.net/10419/229035
• Last update: 10.03.2025, 11:42 AM CET