Monetary policy and exchange rate dynamics in the Spanish economy
AbstractAs the Spanish economy gets more integrated in international markets, the real exchange rate becomes a key determinant of the monetary transmission. In this paper we trace out the dynamic response of prices, output and the exchange rate following a monetary policy shock. We estimate a structural VAR model whose identification scheme is based on the long run properties common to a large class of models. The results suggest that a small model with efficient asset markets plus nominal inertia and long run monetary neutrality, captures the essential features of the monetary transmission mechanism in Spain. The interest rate shock is well identified and the exchange rate overshoots its long run value. There are no signs of liquidity puzzle nor of price puzzle or exchange rate puzzle either.
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Bibliographic InfoArticle provided by Springer in its journal Spanish Economic Review.
Volume (Year): 1 (1999)
Issue (Month): 1 ()
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Other versions of this item:
- Javier AndrÃ©s & Ricardo Mestre & Javier VallÃ©s, 1997. "Monetary Policy and Exchange Rate Dynamics in the Spanish Economy," Banco de Espaï¿½a Working Papers 9727, Banco de Espa�a.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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- Monticello, Carlo & Tristani, Oreste, 1999. "What does the single monetary policy do? A SVAR benchmark for the European Central Bank," Working Paper Series 0002, European Central Bank.
- Pedro José Pérez Vázquez, 2003. "Fuentes de variabilidad en las principales economías occidentales," Investigaciones Economicas, Fundación SEPI, vol. 27(3), pages 565-591, September.
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