Abstract: In this paper, based on the IS curve and the Phillips curve equation, the Financial Conditions Index (FCI) of the G20 countries were calculated from the first quarter of 1997 to the second quarter of 2016 using the time-varying state space model. The paper compared the difference of the fluctuation range of the financial markets between the developed countries and the emerging economies in different periods. Based on Taylor's rule equation using panel smooth migration regression model, empirical analysis was conducted on the regional asymmetry effects of monetary policy on output and inflation under different financial situations. Empirical results showed that the volatility of financial markets in developed countries was more pronounced than in emerging economies. As the financial condition index migrates smoothly from the low zone to the high zone, the positive effect of monetary policy's response to output and inflation is gradually increasing. The effect of monetary policy regulation in emerging economies is better than that in the low-zone system, though monetary policy regulation in developed countries is more obvious. Compared with other G20 countries, the monetary policy control effect in China is more prominent.

Key Words: Financial Conditions Index; Monetary Policy; Taylor Rule; Asymmetric Effect; Panel Smooth Migration Regression