Stabilization policies, cyclical fluctuations, and non-linearities.

Summary This thesis constitutes empirical research on cyclical asymmetries in the conduct and transmission of monetary policy. By cyclical asymmetries we refer to the differences between the boom and bust phases of the business cycle. In chapter 1 we present a review of the literature on the Taylor rule and answer the question of whether this rule should be used as a normative or positive instrument. Chapter 2 estimates this rule using a Markov regime-switching model for five OECD economies. Chapter 3 provides a review of the theoretical and empirical literature on the asymmetric (sign, size and cycle) effects of monetary policy on economic activity. Chapter 4 introduces Markov regime-switching vector autoregression models (VAR-MS), our proposed definition of a nonlinear shock response function, and results of Monte Carlo simulations that show the superiority of our definition over the other two existing in the literature. Chapter 5 studies cycle asymmetries via the traditional interest rate channel using a VAR-MS model estimated for the US economy. Chapter 6 analyzes cycle asymmetries via the credit channel using a VAR-MS model estimated for the Eurozone economy. The results of these last two chapters are consistent with the theoretical literature.