Asymmetric Effects of Money Supply Shocks and Trend Inflation

This paper considers a possible explanation for the asymmetric effects of money supply shocks. Based on a sticky price theory, I derive the following two predictions: First, the relationship between trend inflation and the degree of asymmetry is not simply monotonic; instead, increases in inflation...

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Bibliographic Details
Published inJournal of money, credit and banking Vol. 33; no. 1; pp. 65 - 89
Main Author Senda, Takashi
Format Journal Article
LanguageEnglish
Published Columbus Ohio State University Press 01.02.2001
John Wiley & Sons, Inc
Subjects
Asymmetry
Coefficients
Correlation analysis
Economic trends
Empirical research
GDP
Gross Domestic Product
Inflation
Inflation rates
Manycountries
Market prices
Menu costs
Microeconomics
Money supply
Price level changes
Price shocks
Standard deviation
Sticky prices
Stochastic processes
Studies
Supply shock
Supply shocks
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Summary:This paper considers a possible explanation for the asymmetric effects of money supply shocks. Based on a sticky price theory, I derive the following two predictions: First, the relationship between trend inflation and the degree of asymmetry is not simply monotonic; instead, increases in inflation beyond some level can actually reduce the degree of asymmetry. Secondly, the degree of asymmetry is high in countries where the standard deviation of nominal GDP growth is high. I examine prewar and postwar data for OECD countries and find that the cross-country evidence supports both of these predictions.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:0022-2879
1538-4616
DOI:10.2307/2673872