Monetary Transmission and Controllability of Money in Europe: aStructural Vector Error Correction Approach
AbstractIn this paper, a structural vector error correction model (S-VECM) is estimated to investigate three essential prerequisites for a successful monetary targeting strategy: stability, controllability and predictability. First, multivariate cointegration techniques are used to identify two cointegration relations, that are identified as a long run money demand function and the Fisher effect for the long-term interest rate. Identification of the structural model is achieved by imposing contemporaneous and long-term restrictions. It is found that an interest rate shock hardly affects the nominal money stock, whereas the effects on excess money holdings and inflation are negative, but not significant.
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Bibliographic InfoPaper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 36.
Length: 51 pages
Date of creation: 1999
Date of revision:
Other versions of this item:
- P.J.G. Vlaar & H. Schuberth, 1998. "Monetary transmission and controllability of money in Europe: a structural vector error correction approach," WO Research Memoranda (discontinued) 544, Netherlands Central Bank, Research Department.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- 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
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