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Monetary Transmission in three Central European Economies: Evidence from Time-Varying Coefficient Vector Autoregressions

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  • Zsolt Darvas

Abstract

We study the transmission of monetary policy to macroeconomic variables with structural time-varying coefficient vector autoregressions in the Czech Republic, Hungary and Poland, in comparison with that in the euro area. These three countries have experienced changes in monetary policy regimes and went through substantial structural changes, which call for the use of a time-varying parameter analysis. Our results indicate that the impact on output of a monetary shock changed over time. At the point of the last observation of our sample, the fourth quarter of 2011, among the three countries, monetary policy was most powerful in Poland and not much less strong than the transmission in the euro area. We discuss various factors that can contribute to differences in monetary transmission, such as financial structure, labour market rigidities, industry composition, exchange rate regime, credibility of monetary policy and trade openness.

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Bibliographic Info

Paper provided by Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest in its series Working Papers with number 0903.

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Length: 30 pages
Date of creation: 02 Jul 2009
Date of revision: 30 Apr 2012
Handle: RePEc:mkg:wpaper:0903

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Keywords: monetary transmission; time-varying coefficient vector autoregressions; Kalman-filter;

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References

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  1. Roman Horváth & Michal Franta & Marek Rusnák, 2012. "Evaluating Changes in the Monetary Transmission Mechanism in the Czech Republic," Working Papers IES 2012/11, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2012.
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Citations

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Cited by:
  1. Jaromír Baxa & Roman Horváth & Bořek Vašíček, 2010. "How Does Monetary Policy Change? Evidence on Inflation Targeting Countries," Working Papers IES 2010/26, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2010.
  2. Oxana Babecká-Kucharèuková, 2009. "Transmission of Exchange Rate Shocks into Domestic Inflation: The Case of the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(2), pages 137-152, June.
  3. repec:rej:journl:v:16:y:2013:i:47:p:57-74 is not listed on IDEAS
  4. Arratibel, Olga & Michaelis, Henrike, 2013. "The Impact of Monetary Policy and Exchange Rate Shocks in Poland: Evidence from a Time-Varying VAR," Discussion Papers in Economics 21088, University of Munich, Department of Economics.
  5. Michal Franta, 2011. "Identification of Monetary Policy Shocks in Japan Using Sign Restrictions within the TVP-VAR Framework," IMES Discussion Paper Series 11-E-13, Institute for Monetary and Economic Studies, Bank of Japan.
  6. Michal Franta & Roman Horvath & Marek Rusnak, 2014. "Evaluating changes in the monetary transmission mechanism in the Czech Republic," Empirical Economics, Springer, vol. 46(3), pages 827-842, May.
  7. Iulian Vasile POPESCU, 2014. "Global financial crisis-driven mutations affecting the transmission mechanism customized to monetary policy strategies. A VAR, SVAR and BVAR approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(591)), pages 35-66, February.

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