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Monetary transmission in Spain: a structural cointegrated VAR approach

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  • M. Camarero
  • J. Ordonez
  • C. R. Tamarit

Abstract

This paper analyses the monetary policy channels in Spain using a cointegrated structural VAR approach which explicitly accounts for endogenous policy reactions in a small open economy. Evidence is found of one cointegrating relation which is identified as a long-run money demand function. In addition, stability tests are applied to this relationship to assess whether there has been a change of monetary regime. The impulse-responses for the non-monetary shocks as well as the absence of the puzzles traditionally found in the empirical literature, suggest that the model specification identifies the monetary policy shocks correctly. Thus, according to our results, a monetary contraction causes a weak downward response in the price level, as well as an increase in both short and long-run nominal interest rates, a decrease in aggregate output and an exchange rate appreciation.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 34 (2002)
Issue (Month): 17 ()
Pages: 2201-2212

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Handle: RePEc:taf:applec:v:34:y:2002:i:17:p:2201-2212

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Cited by:
  1. Carstensen, Kai & Hagen, Jan & Hossfeld, Oliver & Neaves, Abelardo S., 2009. "Money demand stability and inflation prediction in the four largest EMU countries," Munich Reprints in Economics 19946, University of Munich, Department of Economics.
  2. Daniela Sonedda, 2006. "A structural VAR approach on labour taxation policies," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 38(1), pages 95-114.
  3. Oxley, Les & Reale, Marco & Wilson, Granville Tunnicliffe, 2009. "Constructing structural VAR models with conditional independence graphs," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(9), pages 2910-2916.
  4. Alfred A Haug & Ozer Karagedikli & Satish Ranchhoud, 2003. "Monetary policy transmission mechanisms and currency unions: A vector error correction approach to a Trans-Tasman currency union," Reserve Bank of New Zealand Discussion Paper Series DP2003/04, Reserve Bank of New Zealand.
  5. Par Osterholm, 2008. "A structural Bayesian VAR for model-based fan charts," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 40(12), pages 1557-1569.
  6. D'Adamo, Gaetano, 2010. "Estimating Central Bank preferences in a small open economy: Sweden 1995-2009," MPRA Paper 26575, University Library of Munich, Germany.
  7. Amir Kia, 2006. "Economic policies and demand for money: evidence from Canada," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 38(12), pages 1389-1407.

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