Non-linear shocks create asymmetric policy impacts – paper
Mortgage spreads affect economy more during recession
The effectiveness of policies probably depends on the state of the economy because of non-linearities in financial shocks, according to a Bank of England staff working paper.
Nonlinearities of mortgage spreads over the business cycles, published on December 9, examines how changes in mortgage spreads have a greater impact on the economy during periods of recession than during periods of expansion.
Authors Chak Hung Jack Cheng and Ching-Wai (Jeremy) Chiu say this has "vital" policy implications.
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