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The cross-country impact of ECB policies: Asymmetries in – Asymmetries out?

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  • Serati, Massimiliano
  • Venegoni, Andrea

Abstract

Since its inception, the adequacy of the Eurozone to be an Optimal Currency Area has been questioned, and, along with it, the homogeneous transmission and impact of the monetary impulses across the member countries. We provide a comprehensive assessment of the transmission mechanism’s functioning, its symmetry, impact on target variables, and evolution, addressing all the questions which have remained unanswered in the previous literature, while adding evidence on the impact of non-standard policy measures. We do so by adopting a Bayesian Time-Varying Parameters FAVAR model that fixes the flaws present in past research. The empirical analysis shows that the occurrence of the two crises significantly altered policy transmission, with both the interest rate and credit channel being consistently affected. It also shows that while they provided effective stimuli to the economies, the unconventional measures implemented were not able to fix those asymmetries. Policy-wise, our findings suggest that authorities must push towards consistent innovation on the fiscal side, while gaining more confidence with regards to the new monetary toolkit.

Suggested Citation

  • Serati, Massimiliano & Venegoni, Andrea, 2019. "The cross-country impact of ECB policies: Asymmetries in – Asymmetries out?," Journal of International Money and Finance, Elsevier, vol. 90(C), pages 118-141.
    • Handle: RePEc:eee:jimfin:v:90:y:2019:i:c:p:118-141
    DOI: 10.1016/j.jimonfin.2018.09.008
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    2. Pacicco, Fausto & Serati, Massimiliano & Venegoni, Andrea, 2022. "The Euro Area credit crunch conundrum: Was it demand or supply driven?," Economic Modelling, Elsevier, vol. 106(C).
    3. David KRIZEK & Josef BRCAK, 2021. "Support for export as a non-standard Central Bank policy: foreign exchange interventions in the case of the Czech Republic," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 12, pages 191-218, June.
    4. Apostolakis, Georgios N. & Giannellis, Nikolaos & Papadopoulos, Athanasios P., 2019. "Financial stress and asymmetric shocks transmission within the Eurozone. How fragile is the common monetary policy?," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).

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    More about this item

    Keywords

    Monetary policy transmission; Optimal currency areas; European Monetary Union; Bayesian time-varying parameters FAVAR;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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