Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162671
Authors: 
Floro, Danvee
Van Roye, Björn
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 2042
Abstract: 
This study tests for the state-dependent response of monetary policy to increases in overall financial stress and financial sector-specific stress across a panel of advanced and emerging economy central banks. We use a factor-augmented dynamic panel threshold regression model with (estimated) common components to deal with crosssectional dependence. We find strong evidence of state-dependence in the response of monetary policy to financial sector-specific stress for advanced economy central banks, as they pursue aggressive monetary policy loosening in response to stock market and banking stress only in times of high financial market volatility. By comparison, evidence of threshold effects of financial stress is generally weak for emerging market central banks.
Subjects: 
financial stress
monetary policy
threshold panel regression
cross-section dependence
JEL: 
E31
E44
E52
E58
C23
C24
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2764-2
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.