Asymmetric Effects of Monetary Policy

This paper uses standard econometric models of monetary policy to derive measures of policy shocks to the Federal funds rate. The measures of funds rate shocks are used to test 1) if positive and negative funds rate shocks have an asymmetric effect on real GDP growth and 2) if the effectiveness of monetary policy depends on whether or not the economy is in a recession. The results suggest that monetary policy is equally effective in a recession or expansion and that positive funds rate shocks have a larger absolute value impact on real GDP growth than negative funds rate shocks.