Monetary policy shocks' asymmetric effects on output and price: Central Asia and Balkan States application

In recent years, rapidly evolving technology has a vital place in banking and finance sector. For this reason, evaluating and following this sector's structure and also making adjustments are important not only for people who are interested in, but also for Central Banks and Governments. Also the topic of evaluating this sector has different sub topics. Most important one of these is monetary policy and its effects on economic variables. Monetary policy effects' study comes together with the asymmetric effects investigation. The asymmetric effects of monetary policy means that money supply changes find different and undesirable answers in economy. So, asymmetry may pretend a gear which turns to one direction. Investigation of monetary policy shocks' asymmetric effects have been discussed in a lot of work. These works have been increased during period of Great Depression in USA. In this period, failure of policies caused to emerge asymmetric effect notion. In the following year of Great Depression, 1936, John Maynard Keynes published a book "The General Theory of Employment, Interest and Money". This book helped people to understand asymmetry and its varieties. Then, two types of theory which explain asymmetry came from Georgios Karras; convex aggregate supply curve (supply-side) and pushing on a string (demand-side). In this study, we explore the negative and positive monetary policy shocks on output and price inflation for 11 Central Asia and Balkan states as an emerging market and we take Cover's study as a role model. We used two-step estimation method like Cover (according to autoregression model -AR-). In conclusion, we try to explain which kind of asymmetry these 11 countries have, if they have asymmetry is it supply side or demand side. In analysis, countries M2 (for money supply), consumer price indexes (for price level) and industrial production indexes (for output) are taken from Data Stream program. These data are panel because of different dates. We also use STATA regression analyze program in order to make "fixed effects regression" analysis. Our first stage was generation of equation for money supply. Afterwards, error terms are separated from this equation as positive and negative shocks. When we create industrial production index and inflation equations, these positive and negative shocks are included for fixed effects regression. According to the results, regression analysis helps us to understand there is a supply side asymmetry in this emerging market. When we take into consideration the side of positive and negative shocks, negative monetary policy shocks have stronger have stronger effects on output and weaker effects on price, positive monetary policy shocks have weaker effects on output and stronger effects on prices. Also we can say that positive monetary policy shocks have a stronger effect on price level in this emerging market. Its reason may be price and wage rigidities in downward and flexibilities in upward direction. Key words: Monetary policy shocks, Asymmetric effect, Positive and negative shock asymmetry, Emerging markets, Autoregressive model.