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Monetary policy transmission in the EMS: A VAR approach

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  • Etsuro Shioji

    (Graduate School of Economics)

  • José García-Montalvo

    (Instituto Valenciano de Investigaciones Económicas)

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    Abstract

    This paper analyzes monetary policy transmission in the European Monetary System using VAR techniques. After a discussion of several V AR identification procedures for the stance of monetary policy, this paper proposes an ¡identification scheme that is essentially consistent with the basic facts and does not have significant puzzles. The strategy is based on extracting the stance of monetary policy from the German system and using that structural shock in the VAR systems of other countries of the EMS. The results show that the stronger the commitment with the EMS discipline, the stronger the effect of the German monetary policy on the monetary policy of other EMS countries and the weaker the effect on the exchange rates. El documento analiza la transmisión de la política monetaria en el Sistema Monetario Europea usando técnicas de V AR (Vectores Autorregresivos). Tras discutir sobre varios procedimientos de V AR para la identificación de la situación de la política monetaria, se propone un esquema de identificación, el cual es esencialmente consistente con los hechos económicos. La estrategia está basada en extraer la situación de la política monetaria del sistema alemán y utilizar el "shock" estructural en los sistemas V AR de otros países del SME. Los resultados demuestran que a mayor compromiso con la disciplina del SME, más fuerte es el efecto de la política monetaria alemana en la política monetaria de otros países del SME y más débil el efecto sobre los tipos de cambio.

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    File URL: http://www.ivie.es/downloads/docs/wpasec/wpasec-1997-11.pdf
    File Function: Fisrt version / Primera version, 1997
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    Bibliographic Info

    Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 1997-11.

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    Length: 44 pages
    Date of creation: Oct 1997
    Date of revision:
    Publication status: Published by Ivie
    Handle: RePEc:ivi:wpasec:1997-11

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    Keywords: Transmisión de política monetaria; vectores autorregresivos estructurales Monetary policy transmission; structural VAR;

    References

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    1. Francisco Javier Escribá Pérez & Javier De Castro Pardo & José Ramón Ruiz Tamarit & Vicente Calabuig Alcantara, 1994. "Estimación regionalizada del stock de capital privado (1964-1989)," Working Papers. Serie EC 1994-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
    3. Ben S. Bernanke & Ilian Mihov, 1998. "Measuring Monetary Policy," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 869-902, August.
    4. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
    5. Richard H. Clarida & Mark Gertler, 1997. "How the Bundesbank Conducts Monetary Policy," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 363-412 National Bureau of Economic Research, Inc.
    6. Jacint Balaguer Coll, 1994. "Competencia imperfecta y discriminación de precios en los mercados de exportación: el caso del sector de pavimentos cerámicos," Working Papers. Serie EC 1994-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    7. Eric M. Leeper & Christopher A. Sims, 1994. "Toward a Modern Macroeconomic Model Usable for Policy Analysis," NBER Chapters, in: NBER Macroeconomics Annual 1994, Volume 9, pages 81-140 National Bureau of Economic Research, Inc.
    8. David B. Gordon & Eric M. Leeper, 1993. "The dynamic impacts of monetary policy: an exercise in tentative identification," Working Paper 93-5, Federal Reserve Bank of Atlanta.
    9. Cecilio R. Tamarit Escalona & Vicente Esteve Garcia & Maria Amparo Camarero Olivas, 1997. "Gasto público y consumo privado en España: ¿sustitutivos o complementarios?," Working Papers. Serie EC 1997-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    10. 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.
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    Cited by:
    1. B. Mojon, 1999. "Monetary policy under a quasi-fixed exchange rate regime. The case of France between 1987 and 1996," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 52(211), pages 401-430.
    2. Kim, Soyoung, 2002. "Exchange rate stabilization in the ERM: identifying European monetary policy reactions," Journal of International Money and Finance, Elsevier, vol. 21(3), pages 413-434, June.
    3. Benoît Mojon, 1998. "Monetary Policy Under a Fixed Exchange Rate Regime, the Case of France 1987-1996," Working Papers 1998-14, CEPII research center.

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