Monetary Asymmetries without (and with) Price Stickiness, I. Jaccard, IER

Monetary Asymmetries without (and with) Price Stickiness<br><br>Evidence suggests that monetary policy transmission is asymmetric over the business cycle. Interacting financing frictions with a preference for liquidity provides an explanation for this fact. Our model reproduces a set of asset market and business cycle facts. Accounting for the joint dynamics of asset prices and business cycle fluctuations is key; in a variant of the model that is unable to produce realistic macro-finance implications, monetary asymmetries disappear. Resorting to nonlinear techniques is therefore not sufficient to detect monetary asymmetries. Nonlinearities in the transmission mechanism also critically depend on the macro-finance implications of monetary policy models.