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Cross-country differences in monetary policy transmission

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  • Robert-Paul Berben

    () (De Nederlandsche Bank)

  • Alberto Locarno

    () (Banca d'Italia)

  • Julian Morgan

    () (European Central Bank)

  • Javier Vallés

    () (Banco de España)

Abstract

This paper examines possible explanations for observed differences in the transmission of euro area monetary policy in central bank large scale macroeconomic models. In particular it considers the extent to which these differences are due to differences in the underlying economies or (possibly unrelated) differences in the modelling strategies adopted for each country. It finds that, against most yardsticks, the cross country variations in the results are found to be plausible in the sense that they correspond with other evidence or observed characteristics of the economies in question. Nevertheless, the role of differing modelling strategies may also play a role. Important features of the models –for instance in the treatment of expectations or wealth– can have a major bearing on the results that may not necessarily reflect differences in the underlying economies.

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File URL: http://www.bde.es/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/05/Fic/dt0502e.pdf
File Function: First version,January 2005
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Bibliographic Info

Paper provided by Banco de España in its series Banco de España Working Papers with number 0502.

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Length: 71 pages
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:bde:wpaper:0502

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Keywords: monetary transmission; macroeconometric models; euro area differences;

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References

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  1. Benoit Mojon & Gert Peersman, 2001. "A VAR description of the effects of monetary policy in the individual countries of the Euro area," Working Paper Series 092, European Central Bank.
  2. Anna Maria Agresti & Benoit Mojon, 2001. "Some stylised facts on the Euro area business cycle," Working Paper Series 095, European Central Bank.
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  4. Michael Ehrmann & Andreas Worms, 2001. "Interbank lending and monetary policy transmission - evidence for Germany," Working Paper Series 073, European Central Bank.
  5. Ignazio Angeloni & Anil K. Kashyap & Benoit Mojon & Daniele Terlizzese, 2003. "The Output Composition Puzzle: A Difference in the Monetary Transmission Mechanism in the Euro Area and U.S," NBER Working Papers 9985, National Bureau of Economic Research, Inc.
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  12. Campa, Jose Manuel & Gonzalez Minguez, Jose M., 2006. "Differences in exchange rate pass-through in the euro area," European Economic Review, Elsevier, vol. 50(1), pages 121-145, January.
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  14. José Manuel Campa & Jose M. González Mínguez, 2002. "Differences in exchange rate pass-through in the euro area," Banco de España Working Papers 0219, Banco de España.
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  17. Issing,Otmar & Gaspar,Vitor & Angeloni,Ignazio & Tristani,Oreste, 2001. "Monetary Policy in the Euro Area," Cambridge Books, Cambridge University Press, number 9780521788885.
  18. Stephen G. Cecchetti, 1999. "Legal structure, financial structure, and the monetary policy transmission mechanism," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 9-28.
  19. Julian Benedict Morgan & Peter McAdam, 2001. "The monetary transmission mechanism in the Euro area level: issues and results using structural macroeconomic models (MTN conference paper)," Working Paper Series 093, European Central Bank.
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