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The Transmission of Euro Area Monetary Shocks to the Czech Republic, Poland and Hungary: Evidence from a FAVAR Model

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Author Info

  • Konstantins Benkovskis

    ()
    (Latvijas Banka, Monetary Policy Department)

  • Andrejs Bessonovs

    ()
    (Latvijas Banka, Monetary Policy Department)

  • Martin Feldkircher

    ()
    (Oesterreichische Nationalbank, Foreign Research Division)

  • Julia Wörz

    ()
    (Foreign Research Division, Oesterreichische Nationalbank)

Abstract

We analyze the effects of euro area monetary policy on three Central and Eastern European non-euro area EU countries: the Czech Republic, Poland and Hungary. We employ an open economy version of the factor-augmented vector autoregression model (FAVAR) to estimate the cross-border effects of a contractionary monetary policy of the ECB. We find significant and sizeable effects of euro area monetary policy in these small and highly open economies, with economic activity variables being primarily affected through the impact of increased interest rates and reduced foreign demand – thus leading to a contraction of GDP – and exchange rate effects being important for price reactions.

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Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Focus on European Economic Integration.

Volume (Year): (2011)
Issue (Month): 3 ()
Pages: 8-36

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Handle: RePEc:onb:oenbfi:y:2011:i:3:b:1

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Related research

Keywords: FAVAR; monetary policy shocks; international transmission; euro area; Central and;

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References

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Citations

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Cited by:
  1. Martin Feldkircher, 2013. "A Global Macro Model for Emerging Europe," Working Papers 185, Oesterreichische Nationalbank (Austrian Central Bank).
  2. Catherine Prettner & Klaus Prettner, 2012. " After Two Decades of Integration: How Interdependent are Eastern European Economies and the Euro Area?," Department of Economics Working Papers wuwp138, Vienna University of Economics, Department of Economics.
  3. Prettner, Catherine & Prettner, Klaus, 2014. "How interdependent are Eastern European economies and the Euro area?," Center for European, Governance and Economic Development Research Discussion Papers 187, University of Goettingen, Department of Economics.

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