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Are the Responses of the U.S. Economy Asymmetric to Positive and Negative Money Supply Shocks?

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Abstract

We investigate whether the United States economy responds asymmetrically to positive and negative money supply shocks of different magnitude, using a test recently introduced by Kilian and Vigfusson (Quant Econ 2:419–453, 2011) based on impulse response functions. We use quarterly data, over the period from 1967:1 to 2014:1, and the new CFS Divisia monetary aggregates, making a comparison among the narrower monetary aggregates, M1, M2M, MZM, M2, and ALL, and the broad monetary aggregates, M4+, M4-, and M3. We show that there is no statistically significant evidence of asymmetry in the response of the U.S. economy to positive and negative money supply shocks of different magnitude.

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Authors and Affiliations

  1. Department of Economics, University of Calgary, Calgary, Alberta, T2N 1N4, Canada

    Apostolos Serletis

  2. Department of Economics & Finance, University of South Alabama, Mobile, AL, 36688, USA

    Khandokar Istiak

Authors
  1. Apostolos Serletis
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  2. Khandokar Istiak
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Correspondence to Apostolos Serletis.

Additional information

We would like to thank Lutz Kilian and a referee for useful comments and suggestions that greatly improved the paper.

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Serletis, A., Istiak, K. Are the Responses of the U.S. Economy Asymmetric to Positive and Negative Money Supply Shocks?. Open Econ Rev 27, 303–316 (2016). https://doi.org/10.1007/s11079-015-9374-8

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  • DOI: https://doi.org/10.1007/s11079-015-9374-8

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