Asymmetric interest rate effects for the UK real economy

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Date

2002-09-01

Author

Sensier, M
Osborn, DR
Ocal, N

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Recent literature has uncovered asymmetries in the response of real output to monetary policy variables. Nevertheless, it remains unclear whether such asymmetries relate to different responses to monetary policy or to the business cycle. This paper uses nonlinear models to examine the issues in the context of interest rate effects on quarterly UK GDP growth. Strong evidence of nonlinearity is found, with asymmetry relating to the business cycle through lagged GDP regimes and interest rate changes. The results suggest that interest rate effects on GDP are larger when either lagged growth has been high or when interest rates have substantially increased in the past. However, the inclusion of interest rate regimes without taking account of GDP regimes yields an unsatisfactory model.

Subject Keywords

Statistics, Probability and Uncertainty, Economics and Econometrics, Statistics and Probability, Social Sciences (miscellaneous)

URI

https://hdl.handle.net/11511/66471

Journal

OXFORD BULLETIN OF ECONOMICS AND STATISTICS

DOI

https://doi.org/10.1111/1468-0084.00028

Collections

Department of Economics, Article

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Citation Formats

M. Sensier, D. Osborn, and N. Ocal, “Asymmetric interest rate effects for the UK real economy,” OXFORD BULLETIN OF ECONOMICS AND STATISTICS, pp. 315–339, 2002, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/66471.