Financial Depth and the Asymmetric Impact of Monetary Policy

24 Pages Posted: 5 Nov 2017

See all articles by Mustafa Caglayan

Mustafa Caglayan

Heriot-Watt University - School of Management and Languages

Ozge Kandemir Kocaaslan

Hacettepe University

Kostas Mouratidis

The Sheffield University - Department of Economics

Date Written: December 2017

Abstract

This paper investigates the importance of financial depth in evaluating the asymmetric impact of monetary policy on real output over the course of the US business cycle. We show that monetary policy has a significant impact on output growth during recessions. We also show that financial deepening plays an important role by dampening the effects of monetary policy shocks in recessions. The results are robust to the use of alternative financial depth and monetary policy shock measures as well as to two different sample periods.

Suggested Citation

Caglayan, Mustafa and Kandemir Kocaaslan, Ozge and Mouratidis, Kostas, Financial Depth and the Asymmetric Impact of Monetary Policy (December 2017). Oxford Bulletin of Economics and Statistics, Vol. 79, Issue 6, pp. 1195-1218, 2017, Available at SSRN: https://ssrn.com/abstract=3064380 or http://dx.doi.org/10.1111/obes.12160

Mustafa Caglayan (Contact Author)

Heriot-Watt University - School of Management and Languages ( email )

Edinburgh EH14 4AS, Scotland
United Kingdom

Ozge Kandemir Kocaaslan

Hacettepe University ( email )

Ankara
Turkey

Kostas Mouratidis

The Sheffield University - Department of Economics ( email )

Sheffield, S1 4DT
Great Britain

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