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The Monetary Transmission Mechanisms In The Ceecs: A Structural Var Approach

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  • OROS, Cornel
  • ROMOCEA-TURCU, Camelia

Abstract

This paper deals with the monetary policy transmission channels of six Central European countries: CEECs – Hungary, Poland, Czech Republic, Romania, Slovakia and Slovenia – over recent periods corresponding to stable monetary regimes. We will take into account three channels – the interest rate, the exchange rate and the domestic credit – whose relative importance will be accounted for using a structural VAR model. The results show that all the countries share a weak domestic credit channel while they are highly heterogeneous with regards to the relative effectiveness of the interest rate and exchange rate channels. Thus, Hungary and Poland’s distinctive feature is the presence of a price puzzle effect combined with a high influence of the exchange rate which acts both as a mechanism of monetary policy transmission and as a supply and demand shock absorber. On the contrary, just like in the case of the Euro zone countries, it is the interest rate channel that has the major influence in the case of the Czech Republic, Slovakia, Slovenia and partially Romania. Therefore, this latter group appears to be more apt to join the EMU in the near future, which can be confirmed by the Slovenian case.

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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 9 (2009)
Issue (Month): 2 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:9:y:2009:i:2_7

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Related research

Keywords: VAR models; monetary policy transmission; CEECs;

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References

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  1. Efrem Castelnuovo & Paolo Surico, 2006. "The price puzzle: fact or artefact?," Bank of England working papers 288, Bank of England.
  2. Elbourne, Adam & de Haan, Jakob, 2006. "Financial structure and monetary policy transmission in transition countries," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 1-23, March.
  3. Gottschalk, Jan & Moore, David, 2001. "Implementing Inflation Targeting Regimes: The Case of Poland," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 24-39, March.
  4. Kim, Soyoung & Roubini, Nouriel, 2000. "Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 561-586, June.
  5. Giordani, Paolo, 2001. "An Alternative Explanation of the Price Puzzle," Working Paper Series 125, Sveriges Riksbank (Central Bank of Sweden).
  6. Peter Christoffersen & Torsten Sløk & Robert Wescott, 2001. "Is inflation targeting feasible in Poland?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(1), pages 153-174, March.
  7. Bohdan Klos & Ewa Wrobel, 2001. "The monetary transmission mechanism and the structural modelling of inflation at the National Bank of Poland," BIS Papers chapters, in: Bank for International Settlements (ed.), Modelling aspects of the inflation process and the monetary transmission mechanism in emerging market countries, volume 8, pages 232-251 Bank for International Settlements.
  8. Botel, Cezar, 2003. "Monetary Policy, Exchange Rate, And The Transmission Mechanism In Romania: A Structural Var Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 65-85, December.
  9. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 0091, European Central Bank.
  10. Alessio Anzuini & Aviram Levy, 2004. "Financial structure and the transmission of monetary shocks: preliminary evidence for the Czech Republic, Hungary and Poland," Temi di discussione (Economic working papers) 514, Bank of Italy, Economic Research and International Relations Area.
  11. Georgy Ganev & Krisztina Molnar & Krzysztof Rybinski & Przemyslaw Wozniak, 2002. "Transmission Mechanism of Monetary Policy in Centraland Eastern Europe," CASE Network Reports 0052, CASE-Center for Social and Economic Research.
  12. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
  13. Mojon, Benoît & Peersman, Gert, 2001. "A VAR description of the effects of monetary policy in the individual countries of the euro area," Working Paper Series 0092, European Central Bank.
  14. Katerina Arnostova & Jaromir Hurnik, 2005. "The Monetary Transmission Mechanism in the Czech Republic (evidence from VAR analysis)," Working Papers 2005/04, Czech National Bank, Research Department.
  15. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
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Cited by:
  1. Tomas Havranek & Marek Rusnak, 2012. "Transmission Lags of Monetary Policy: A Meta-Analysis," William Davidson Institute Working Papers Series wp1038, William Davidson Institute at the University of Michigan.

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