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A VAR description of the effects of monetary policy in the individual countries of the Euro area

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Author Info
Benoit Mojon () (European Central Bank, Kaiserstrasse 29, Postfach 16 03 19, 60066 Frankfurt am Main, Germany.)
Gert Peersman () (Ghent University - Department of Financial Economics, W. Wilsonplein 5D, Ghent 9000, Belgium.)

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Abstract

This paper presents a complete set of results describing the effects of monetary policy in 10 countries of the Euro area for the pre-EMU period. For each country, we impose one of three identification schemes depending on its monetary integration with Germany, the nominal anchor of the ERM. The first identification scheme applies to Germany, the second to countries of the core EMS (Austria, Belgium and the Netherlands) and the third to all the other countries. An unexpected rise in the short-term interest rate leads to a decrease in GDP, (with investment and exports falling more than consumption) and a gradual decrease in prices for all countries. We also show that, given the width of the error bands around the estimate, we cannot reject that the effects of monetary policy on GDP and on prices are broadly similar in the individual countries of the Euro area. JEL Classification: E52.

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Paper provided by European Central Bank in its series Working Paper Series with number 092.

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Length: 49 pages
Date of creation: Dec 2001
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Handle: RePEc:ecb:ecbwps:20010092

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Related research
Keywords: Euro area countries; monetary policy; VARs.;

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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. Ioannis Halikias & Joaquim Vieira Ferreira Levy, 1997. "Aspects of the Monetary Transmission Mechanism under Exchange Rate Targeting: The Case of France," IMF Working Papers 97/44, International Monetary Fund.
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    Other versions:
  4. Rudiger Dornbusch & Carlo A. Favero & Francesco Giavazzi, 1998. "The Immediate Challenges for the European Central Bank," NBER Working Papers 6369, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Cushman, David O. & Zha, Tao, 1997. "Identifying monetary policy in a small open economy under flexible exchange rates," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 433-448, August. [Downloadable!] (restricted)
    Other versions:
  12. Christina D. Romer & David H. Romer, 1997. "Reducing Inflation: Motivation and Strategy," NBER Books, National Bureau of Economic Research, Inc, number rome97-1.
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  14. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Eichenbaum, Martin & Evans, Charles L, 1995. "Some Empirical Evidence on the Effects of Shocks to Monetary Policy on Exchange Rates," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 975-1009, November. [Downloadable!] (restricted)
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  21. Matteo Ciccarelli & Alessandro Rebucci, 2002. "The Transmission Mechanism of European Monetary Policy: Is There Heterogeneity? Is it Changing over Time?," IMF Working Papers 02/54, International Monetary Fund. [Downloadable!]
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    Other versions:
  26. Etsuro Shioji, 1997. "Spanish Monetary Policy: A Structural VAR Analysis," Economics Working Papers 215, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  27. Rudi Dornbusch & Carlo Favero & Francesco Giavazzi, 1998. "Immediate challenges for the European Central Bank," Economic Policy, CEPR, CES, MSH, vol. 13(26), pages 15-64, 04. [Downloadable!] (restricted)
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