Abstract: Based on the China's data from 1990:0l to 2008:12. This paper investigates whether there are asymmetric effects of monetary policy in China's economy. We use logistic smooth transition vector autoregression (LSTVAR) model to focus on the nonlinearity of the whole system varying over the transition variables. The results of estimation and generalized impulse response function imply that the effects of out-put and inflation vary with the sign of monetary shocks,the size of monetary shocks,and the phase of the business cycle. Furthermore,the relationship between the aggregate supply and the aggregate demand is nonlinear and the aggregate supply curve is convex.

Key words: monetary policy, asymmetric effects, LSTVAR model, generalized impulse response function