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The transmission of monetary policy impulses in Belgium

Author

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  • V. Périlleux

    (National Bank of Belgium, Research Department)

  • Q. Wibaut

    (National Bank of Belgium, Research Department)

Abstract

The first part of this article outlines the monetary policy transmission process. It pinpoints some special features of the Belgian economy, such as its high degree of openness, especially in relation to euro area partners, the high level of household financial assets, relatively weak dependence on bank lending at macroeconomic level, and the automatic indexation of wages. The macroeconomic simulations presented in the second part of the article show that, in Belgium as in the euro area, a monetary policy tightening tends to cause a temporary contraction in activity, due substantially to the decline in investment, and a slower but more persistent fall in prices. The euro appreciation normally caused by such a monetary policy shock amplifies its effects on activity, but above all accelerates its impact on prices. The reaction of the Belgian economy does not appear to be obviously different from that of the rest of the euro area. It seems to be slightly more moderate in volume, owing to the lower sensitivity of investment, and more rapid in terms of prices.

Suggested Citation

  • V. Périlleux & Q. Wibaut, 2004. "The transmission of monetary policy impulses in Belgium," Economic Review, National Bank of Belgium, issue ii, pages 37-45, June.
    • Handle: RePEc:nbb:ecrart:y:2004:m:june:i:ii:p:37-45
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    File URL: https://www.nbb.be/en/articles/transmission-monetary-policy-impulses-belgium
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    References listed on IDEAS

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    1. Jeanfils, P., 2000. "A Model with Explicit Expectations for Belgium," Papers 4, Warwick - Development Economics Research Centre.
    2. Angeloni,Ignazio & Kashyap,Anil K. & Mojon,Benoît (ed.), 2003. "Monetary Policy Transmission in the Euro Area," Cambridge Books, Cambridge University Press, number 9780521828642.
    3. Paxil Butzen & Catherine Fuss & Philip Vermeulen, 2002. "The interest rate and crédit channels in Belgium: an investigation with micro-level firm data," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 45(3), pages 5-36.
    4. Bruno Eugène & Philippe Jeanfils & Benoît Robert, 2003. "La consommation privée en Belgique," Working Paper Document 39, National Bank of Belgium.
    5. Peter van Els & Alberto Locarno & Benoît Mojon & Julian Morgan, 2003. "New Macroeconomic Evidence on Monetary Policy Transmission in the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 720-730, 04/05.
    6. Ehrmann, Michael & Backé, Peter, 2003. "Monetary policy transmission in the euro area: any changes after EMU?," Working Paper Series 240, European Central Bank.
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    Cited by:

    1. V. Baugnet & M. Hradisky, 2004. "Determinants of Belgian bank lending intrest rates," Economic Review, National Bank of Belgium, issue iii, pages 43-58, September.

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