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The Effects of the Euro Area Entrance on the Monetary Transmission Mechanism in Slovakia in Light of the Global Economic Recession

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  • Jan Klacso

    (National Bank of Slovakia)

Abstract

In this paper we estimate the monetary policy reaction function of the National Bank of Slovakia and the possible impact of an independent monetary policy on the Slovak economy in 2009 and 2010, when the global economic recession had the strongest impact on Slovakia. We estimate a small macroeconomic VEC model using a modified version of a Bayesian estimation technique developed for models using data observed with different frequencies with core inflation, the exchange rate, the real growth rate of GDP, the balance of trade and the interbank interest rate as endogenous domestic variables. Based on counterfactual simulations, we show that while an independent monetary policy would not be able to mitigate the drop in GDP in the first half of 2009, the recovery phase would have been positively affected.

Suggested Citation

  • Jan Klacso, 2015. "The Effects of the Euro Area Entrance on the Monetary Transmission Mechanism in Slovakia in Light of the Global Economic Recession," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 65(1), pages 55-83, January.
    • Handle: RePEc:fau:fauart:v:65:y:2015:i:1:p:55-83
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    More about this item

    Keywords

    monetary policy; transmission mechanism; Bayesian VEC models; mixed frequency data;
    All these keywords.

    JEL classification:

    • 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
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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