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An empirical study of the cyclical effects of monetary policy in Spain (1977-1997)

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  • Juan J. Dolado

    (Universidad Carlos III de Madrid)

  • Ramón María-Dolores

    (Universidad Carlos III de Madrid y Universidad de Murcia)

Abstract

In this paper, we provide empirical evidence for the Spanish economy, over the period 1977-97, on whether monetary policy shocks have had different effects on real output growth depending on the state of the business cycle. To do so, we adopt an extension of Hamilton's (1989) Markov Switching Model, as recently proposed by García and Schaller (1995), where shocks to an interest rate policy rule followed by the Bank of Spain are allowed to affect both the growth rate of output and the transition probabilities of moving from one phase to another. The analysis is carried out both at the aggregate level and the sectorial level, with the aim of addressing the following questions: (i) Does monetary policy have the same effect regardless of the current phase of economic fluctuations?, (ii) Does monetary policy only have an incremental effect on output growth rate within a given state or does it also affect the probability of state switch, and, (iii) How do the aggregate and sectorial results compare?

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Bibliographic Info

Article provided by Fundación SEPI in its journal Investigaciones Economicas.

Volume (Year): 25 (2001)
Issue (Month): 1 (January)
Pages: 3-30

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Handle: RePEc:iec:inveco:v:25:y:2001:i:1:p:3-30

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  1. Morten O. Ravn & Martín Solà, 1997. "Asymmetric effects of monetary policy in the US: Positive vs. negative or big vs. small?," Economics Working Papers 247, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1997.
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  18. Etsuro Shioji, 1997. "Spanish monetary policy: A structural VAR analysis," Economics Working Papers 215, Department of Economics and Business, Universitat Pompeu Fabra.
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Cited by:
  1. Engelbert Stockhammer & Simon Sturn, 2008. "The Impact of Monetary Policy on Unemployment Hysteresis," IMK Working Paper 15-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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