On the asymmetric effects of money-supply shocks: international evidence from a panel of OECD countries

Abstract

We examine whether the asymmetric effect of money on output is an international phenomenon, and investigate the reasons for this asymmetry. Quarterly data from the 1963-93 period for a panel of twelve OECD countries strongly support asymmetry internationally: negative money-supply shocks are shown to have a stronger effect on output than positive shocks. Our methodology also enables us to distinguish between two sets of theories consistent with the output asymmetries: a convex aggregate supply and a credit view. We find that the effects of money on prices are generally symmetric, which may be consistent with both sets of theories being operative at once.