01762cas a2200241 a 4500 AALejournalIMF017868 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484313794 1018-5941 BD-DhAAL BD-DhAAL Saldias, Martin. The Nonlinear Interaction Between Monetary Policy and Financial Stress / Martin Saldias. Washington, D.C. : International Monetary Fund, 2017. 1 online resource (34 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper analyzes the nonlinear relationship between monetary policy and financial stress and its effects on the transmission of shocks to output. Results from a Bayesian Threshold Vector Autoregression (TVAR) model show that the effects of monetary policy shocks on output growth are stronger during normal times than during times of financial stress. Monetary policy shocks are effective to ease stressed financial conditions, but have limited ability to fully contain the buildup of vulnerabilities. These results have important policy implications for central banks' countercyclical policies under different financial conditions and for 'lean against the wind' policies to address financial vulnerabilities. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2017/184 Full text available on IMF http://elibrary.imf.org/view/journals/001/2017/184/001.2017.issue-184-en.xml IMF e-Library