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IS BIGGER MORE EFFECTIVE? SHOCK SIZE AND THE EFFICACY OF MONETARY POLICY

Published online by Cambridge University Press:  09 June 2021

Toyoichiro Shirota
Toyoichiro Shirota*
Affiliation:
Hokkaido University
*
Address correspondence to: Hokkaido University, Kita 9 Nishi 7, Kita-ku, Sapporo, Hokkaido, 060-0809, Japan. e-mail: toyoichiro.shirota@econ.hokudai.ac.jp. Phone: +81-11-706-4058.
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Abstract

This study empirically examines whether shock size matters for the US monetary policy effects. Using a nonlinear local projection method, I find that large monetary policy shocks are less powerful than smaller monetary policy shocks, with the information effect being the potential source of the observed asymmetry in monetary policy efficacy.

Keywords

Asymmetric monetary policy effectNonlinear local projectionInformation effect
Type
Articles
Information
Macroeconomic Dynamics , Volume 26 , Issue 8 , December 2022 , pp. 2204 - 2215
Copyright
© Cambridge University Press 2021

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Footnotes

I am grateful to the editor, two anonymous referees, Ippei Fujiwara, Yasuo Hirose, James Morley, Keiichiro Kobayashi, Masao Ogaki, participants of RCAST macroeconomic workshop at University of Tokyo, the annual meeting of the EEA and WEAI, for comments and suggestions. All errors are on my own. This research is supported by a grant-in-aid from Murata Science Foundation and JSPS KAKENHI Grant Number 18K01558.

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