Asymmetric Interest Rate Effects for the UK Real Economy

Recent literature has uncovered asymmetries in the response of real output to monetary policy variables. Nevertheless, it remains unclear whether such asymmetries relate to different responses to monetary policy or to the business cycle. This paper uses nonlinear models to examine the issues in the...

Full description

Saved in:
Bibliographic Details
Published in:Oxford bulletin of economics and statistics 2002-09, Vol.64 (4), p.315-339
Main Authors: Sensier, Marianne, Osborn, Denise R., Öcal, Nadir
Format: Article
Language:English
Subjects:
Business cycles
Economic conditions
Economic impact
Economic models
Economics
GDP
Gross Domestic Product
Interest rates
Monetary policy
Statistical methods
Studies
United Kingdom
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Recent literature has uncovered asymmetries in the response of real output to monetary policy variables. Nevertheless, it remains unclear whether such asymmetries relate to different responses to monetary policy or to the business cycle. This paper uses nonlinear models to examine the issues in the context of interest rate effects on quarterly UK GDP growth. Strong evidence of nonlinearity is found, with asymmetry relating to the business cycle through lagged GDP regimes and interest rate changes. The results suggest that interest rate effects on GDP are larger when either lagged growth has been high or when interest rates have substantially increased in the past. However, the inclusion of interest rate regimes without taking account of GDP regimes yields an unsatisfactory model. Copyright 2002 by Blackwell Publishing Ltd
ISSN:0305-9049
1468-0084
DOI:10.1111/1468-0084.00028