Does Consumption Growth Respond Asymmetrically to Positive and Negative Repo Rate Changes?
Evidence shows that household consumption declines by a big margin to a repo rate tightening compared to an increase due to repo rate loosening. This indicates significant asymmetry in the household consumption response to the repo rate changes. The implications are that repo rate tightening tends to have large impact on household consumption compared to those due to the repo rate loosening. Furthermore, evidence shows that household consumption adjusts much faster to correct when the consumption dis-equilibrium is above compared to when it is below the long-run equilibrium level.
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