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The Transmission of German Monetary Policy in the Pre-Euro Period

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Author Info
Luetkepohl, Helmut
Wolters, Juergen

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Abstract

A small macroeconomic model is constructed to study the transmission of the monetary policy conducted by the Deutsche Bundesbank (DBB) since the middle of the 1970s. For this purpose quarterly, seasonally unadjusted data for the period from 1975 to 1998 are used, that is, the period until the introduction of the Euro is considered. A vector error correction model is constructed for the German monetary sector based on M3, GNP, an inflation rate, a long-term interest rate and a short-term rate which represents the policy variable of the DBB. Moreover, import price inflation is included as an exogenous variable to capture foreign effects. An impulse response analysis highlights the effects of changes in the short-term interest rate and shows the interaction of the main variables of the monetary sector.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 604.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_604

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Related research
Keywords: cointegration analysis; impulse response analysis; monetary policy; money demand; structural vector error correction model;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Issing, Otmar, 1997. "Monetary targeting in Germany: The stability of monetary policy and of the monetary system," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 67-79, June. [Downloadable!] (restricted)
  2. Benkwitz, Alexander & Lütkepohl, Helmut & Wolters, Jürgen, 1999. "Comparison of Bootstrap Confidence Intervals for Impulse Responses of German Monetary Systems," CEPR Discussion Papers 2208, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. James MacKinnon, 1990. "Critical Values for Cointegration Tests," University of California at San Diego, Economics Working Paper Series 90-4, Department of Economics, UC San Diego. [Downloadable!]
  4. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
    Other versions:
  5. Perron, Pierre, 1990. "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 153-62, April.
    Other versions:
  6. Jürgen Wolters & Timo Teräsvirta & Helmut Lütkepohl, 1998. "Modeling The Demand For M3 In The Unified Germany," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 399-409, August. [Downloadable!] (restricted)
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  7. M. Lanne & H. Lütkepohl, . "Unit Root Tests for Time Series with Level Shifts: A Comparison of Different Proposals," Sonderforschungsbereich 373 2001-5, Humboldt Universitaet Berlin.
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  8. Michael Scharnagl, 1998. "The stability of German money demand: Not just a myth," Empirical Economics, Springer, vol. 23(3), pages 355-370. [Downloadable!] (restricted)
  9. K. Hubrich, . "System estimation of the German money demand - a long-run analysis," Sonderforschungsbereich 373 1996-77, Humboldt Universitaet Berlin.
  10. Juselius, Katarina, 1996. "An Empirical Analysis of the Changing Role of the German Bundesbank after 1983," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 791-819, November.
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  11. Grayham E. Mizon & David F. Hendry, 1998. "Exogeneity, causality, and co-breaking in economic policy analysis of a small econometric model of money in the UK," Empirical Economics, Springer, vol. 23(3), pages 267-294. [Downloadable!] (restricted)
  12. Hansen, Gerd & Kim, Jeong-Ryeol, 1996. "Money and Inflation in Germany: A Cointegration Analysis," Empirical Economics, Springer, vol. 21(4), pages 601-16.
  13. Katarina Juselius, 1998. "Changing monetary transmission mechanisms within the EU," Empirical Economics, Springer, vol. 23(3), pages 455-481. [Downloadable!] (restricted)
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  14. Lutkepohl, Helmut & Saikkonen, Pentti, 2000. "Testing for the cointegrating rank of a VAR process with a time trend," Journal of Econometrics, Elsevier, vol. 95(1), pages 177-198, March. [Downloadable!] (restricted)
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  15. JØrgen Wolters & Helmut LØtkepohl, 1998. "A money demand system for German M3," Empirical Economics, Springer, vol. 23(3), pages 371-386. [Downloadable!] (restricted)
  16. Saikkonen, Pentti & Lutkepohl, Helmut, 2000. "Testing for the Cointegrating Rank of a VAR Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(4), pages 451-64, October.
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Helmut LÜTKEPOHL, 2004. "Recent Advances in Cointegration Analysis," Economics Working Papers ECO2004/12, European University Institute. [Downloadable!]
  2. Kai Carstensen, 2003. "Is European Money Demand Still Stable?," Kiel Working Papers 1179, Kiel Institute for the World Economy. [Downloadable!]
  3. Ralf Brueggemann & Helmut Luetkepohl, 2004. "A Small Monetary System for the Euro Area Based on German Data," Economics Working Papers ECO2004/24, European University Institute. [Downloadable!]
    Other versions:
  4. Paolo PAESANI, 2003. "Will the Monetary Pillar Stay? A Few Lessons from the UK," Economics Working Papers ECO2003/10, European University Institute. [Downloadable!]
  5. Joseph P. Byrne & Roger Perman, 2006. "Unit Roots and Structural Breaks: A Survey of the Literature," Working Papers 2006_10, Department of Economics, University of Glasgow. [Downloadable!]
  6. R. Brüggemann, . "On the Small Sample Properties of Weak Exogeneity Tests in Cointegrated VAR models," Sonderforschungsbereich 373 2002-2, Humboldt Universitaet Berlin.
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