Fry-Mckibbin, RenéeZheng, Jasmine2016-08-182016-08-180003-6846http://hdl.handle.net/1885/107222This article analyzes the impact of monetary policy during periods of low and high financial stress in the US economy using a threshold vector autoregression model. There is evidence that expansionary monetary policy is effective during periods of high financial stress with larger responses having a higher proportionate effect on output. The existence of a cost channel effect during periods of high financial stress implies the existence of a short run output-inflation trade off during financial crises. Large expansionary monetary shocks also increase the likelihood of moving the economy out of a high financial stress regime.© 2016 Informa UK Limited, trading as Taylor & Francis Group. http://www.sherpa.ac.uk/romeo/issn/0003-6846/..."author can archive pre-print (ie pre-refereeing)" from SHERPA/RoMEO site (as at 19/08/16).Monetary policyfinancial stressthreshold vector autoregression models201610.1080/00036846.2016.1186792