Loss aversion and the asymmetric transmission of monetary policy

Santoro, Emiliano; Petrella, Iván; Pfajfar, Damjan; Gaffeo, Edoardo

doi:10.1016/j.jmoneco.2014.07.009

Cited by 65 publications

(46 citation statements)

References 75 publications

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“…12 Previous studies parameterize rather than estimate the degree of regime-switching (Auerbach and Gorodnichenko, 2013;Tenreyro and Thwaites, 2016;Santoro, Petrella, Pfajfar, and Gaffeo, 2014). 13 We use a value of θ = 5, but our results are robust to a wide range of values.…”

Section: Smooth Transition Local Projection Modelmentioning

confidence: 91%

Disagreement and Monetary Policy

2017

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Section: Smooth Transition Local Projection Modelmentioning

confidence: 91%

Disagreement and Monetary Policy

2017

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“…Nalewaik (2016) introduces a nonlinearity through a squared term on the unemployment rate when it is low in a tworegime switching model using national core PCE price inflation over the 1961 to 2016 time period, and he finds that this nonlinearity is statistically significant. Santoro, et al (2014) find some support for asymmetries over the 1982 to 2008 period, though only look at overall GDP prices making it unclear if their result is being driven by the large run-up in oil prices near the end of their sample. Albuquerque and Baumann (2017) also suggest a nonlinearity, but do not test it directly and find a linear unemployment rate gap and a nonlinear unemployment rate gap both provide the same level of overall regression fit in a US PCE price Phillips curve over the 1992 to 2015 time period.…”

Section: Introductionmentioning

confidence: 95%

Nonlinearities in the Phillips Curve for the United States: Evidence Using Metropolitan Data

Babb

Detmeister

2017

FEDS

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With the unemployment rate in the United States currently below estimates of its natural rate we examine if the relationship between inflation and unemployment is nonlinear. Using aggregate data we are unable to reject a linear relationship. However, using metropolitan-level data we find the slope of the Phillips curve is roughly twice as large when unemployment is low compared to when it is high. Nevertheless the simple nonlinear Phillips curves used here suggest a core CPI inflation rate that is only slightly different than the linear version over the next couple of years.

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“…If we want contractionary policy to have a stronger effect than expansionary policy, consumers and producers would have to be more pessimistic during recession than they are optimistic during expansions. Santoro, Petrella, Pfajfar, and Gaffeo (2014) provide an example of asymmetric monetary policy due to different expectations.…”

Section: Introductionmentioning

confidence: 99%

“…Empirical evidence addresses different issues about asymmetric behaviour of monetary policy. A number of studies reveal that monetary policy has asymmetric effects on output and contractionary policy is seen to be inherently more effective than expansionary policy (Barnichon & Matthes, 2016; Cover, 1992; Garcia & Schaller, 2002; Kakes, 1998; Karras, 1996; Kilinc & Tunc, 2019; Peersman & Smets, 2001, 2002; Santoro et al, 2014; Tan & Habibullah, 2007). But other studies report that the direction of the monetary change is not an important issue whereas its size is a central issue (e.g., Ravn & Sola, 1996).…”

Section: Introductionmentioning

confidence: 99%