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Monetary policy transmission: the case of Lithuania

Author

Listed:
  • Julius Stakėnas

    (Economics Department, Bank of Lithuania, Vilnius, Lithuania)

  • Rasa Stasiukynaite

    (Economics Department, Bank of Lithuania, Vilnius, Lithuania)

Abstract

We study the effect of a (standard) monetary policy shock in the euro area on the Lithuanian economy. We employ a structural vector autoregressive model incorporating variables from both the euro area and Lithuania. The model exhibits a block exogenous structure to account for the fact that Lithuania is a small economy. In general, we find that a monetary policy shock in the euro area has a stronger effect on the Lithuanian than it does on the euro area economy, though the effects are not statistically significant, preventing firm conclusions. We further broaden our analysis employing a panel vector autoregression (PVAR) model for the three Baltic states. PVAR model results suggest a stronger impact of monetary policy than that estimated using the Lithuanian model and a quite considerable degree of variation over time in the strength of monetary policy transmission.

Suggested Citation

  • Julius Stakėnas & Rasa Stasiukynaite, 2017. "Monetary policy transmission: the case of Lithuania," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 17(1), pages 1-24.
    • Handle: RePEc:bic:journl:v:17:y:2017:i:1:p:1-24
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    File URL: https://www.tandfonline.com/doi/epdf/10.1080/1406099X.2016.1242330
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    Citations

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    Cited by:

    1. Josef Bajzik & Jan Janku & Simona Malovana & Klara Moravcova & Ngoc Anh Ngo, 2023. "Monetary Policy Has a Long-Lasting Impact on Credit: Evidence from 91 VAR Studies," Working Papers 2023/19, Czech National Bank.
    2. Nicolas Reigl & Karsten Staehr, 2020. "Negative Interest Rates in the Five Eurozone Countries from Central and Eastern Europe," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 21(01), pages 24-30, April.

    More about this item

    Keywords

    Monetary policy; euro area; SVAR; panel VAR;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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