Financial Depth and the Asymmetric Impact of Monetary Policy


Caglayan M., KANDEMİR KOCAASLAN Ö. , Mouratidis K.

OXFORD BULLETIN OF ECONOMICS AND STATISTICS, vol.79, no.6, pp.1195-1218, 2017 (Journal Indexed in SCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 79 Issue: 6
  • Publication Date: 2017
  • Doi Number: 10.1111/obes.12160
  • Title of Journal : OXFORD BULLETIN OF ECONOMICS AND STATISTICS
  • Page Numbers: pp.1195-1218

Abstract

This paper investigates the importance of financial depth in evaluating the asymmetric impact of monetary policy on real output over the course of the US business cycle. We show that monetary policy has a significant impact on output growth during recessions. We also show that financial deepening plays an important role by dampening the effects of monetary policy shocks in recessions. The results are robust to the use of alternative financial depth and monetary policy shock measures as well as to two different sample periods.