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The Monetary Transmission Mechanisms In The Ceecs: A Structural Var Approach

  • OROS, Cornel
  • ROMOCEA-TURCU, Camelia

This paper deals with the monetary policy transmission channels of six Central European countries: CEECs – Hungary, Poland, Czech Republic, Romania, Slovakia and Slovenia – over recent periods corresponding to stable monetary regimes. We will take into account three channels – the interest rate, the exchange rate and the domestic credit – whose relative importance will be accounted for using a structural VAR model. The results show that all the countries share a weak domestic credit channel while they are highly heterogeneous with regards to the relative effectiveness of the interest rate and exchange rate channels. Thus, Hungary and Poland’s distinctive feature is the presence of a price puzzle effect combined with a high influence of the exchange rate which acts both as a mechanism of monetary policy transmission and as a supply and demand shock absorber. On the contrary, just like in the case of the Euro zone countries, it is the interest rate channel that has the major influence in the case of the Czech Republic, Slovakia, Slovenia and partially Romania. Therefore, this latter group appears to be more apt to join the EMU in the near future, which can be confirmed by the Slovenian case.

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Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 9 (2009)
Issue (Month): 2 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:9:y:2009:i:2_7
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  1. Botel, Cezar, 2003. "Monetary Policy, Exchange Rate, And The Transmission Mechanism In Romania: A Structural Var Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 65-85, December.
  2. Efrem Castelnuovo & Paolo Surico, 2005. "The Price Puzzle: Fact or Artefact?," Macroeconomics 0505015, EconWPA, revised 15 Jun 2005.
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  12. Georgy Ganev & Krisztina Molnar & Krzysztof Rybinski & Przemyslaw Wozniak, 2002. "Transmission Mechanism of Monetary Policy in Centraland Eastern Europe," CASE Network Reports 0052, CASE-Center for Social and Economic Research.
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