Monetary policy transmission during financial crises: An empirical analysis

Arbeitspapier

This paper studies the effects of a monetary policy expansion in the United States during times of high financial stress. The analysis is carried out by introducing a smooth transition factor model where the transition between states "normal" and high financial stress) depends on a financial conditions index. Employing a quarterly data set over the period 1970Q1 to 2009Q2 containing 108 U.S. macroeconomic and financial time series, I find that a monetary policy shock during periods of high financial stress has stronger and more persistent effects on macroeconomic variables such as output, consumption, and investment than it has during "normal" times. Differences in effects among the regimes seem to originate from non-linearities in the credit channel.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Canada Working Paper ; No. 2014-21

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; 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 ; Financial Crises
• Subject: Financial markets ; Econometric and statistical methods ; Transmission of monetary policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dahlhaus, Tatjana
• Event: Veröffentlichung
• (who): Bank of Canada
• (where): Ottawa
• (when): 2014

Further information

• DOI: doi:10.34989/swp-2014-21
• Handle: http://hdl.handle.net/10419/103034
• Last update: 10.03.2025, 11:45 AM CET