Measuring Euro Area Monetary Policy Transmission in a Structural Dynamic Factor Model
AbstractWe study the effects of euro area common monetary policy by means of a structural dynamic factor model estimated on a large panel of euro area quarterly series. While we estimate a flat response of prices to a monetary policy shock, which we explain as aggregation of heterogeneous country-specific responses, we find no relevant asymmetries between countries in terms of output reaction. However, for both Spain and Italy, we find asymmetries in consumption, investment and unemployment. The introduction of the single currency in 1999 has helped reducing asymmetries in price responses but not in consumption and investment.
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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 441.
Length: 40 pages
Date of creation: Mar 2011
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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; 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-02 (All new papers)
- NEP-CBA-2011-04-02 (Central Banking)
- NEP-EEC-2011-04-02 (European Economics)
- NEP-MON-2011-04-02 (Monetary Economics)
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- Bessonovs, Andrejs & Feldkircher, Martin & Benkovskis, Konstantins & Wörz, Julia, 2011. "The Transmission of Euro Area Monetary Shocks to the Czech Republic, Poland and Hungary: Evidence from a FAVAR Model," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3.
- Catherine Prettner & Klaus Prettner, 2012. " After Two Decades of Integration: How Interdependent are Eastern European Economies and the Euro Area?," Department of Economics Working Papers wuwp138, Vienna University of Economics, Department of Economics.
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