Monetary Policy Transmission in Italy: A BVAR Analysis with Sign Restriction
In this paper, we propose a Bayesian VAR model to examine the short term effects of monetary policy shocks on the Italian economy. Firstly, our BVAR model uses the Cholesky decomposition to identify four kinds of macroeconomic shocks, namely, supply, demand, interest rate and monetary shocks. Then, from the theoretical model, we derive and impose a minimum set of robust sign restrictions to identify the transmission mechanism of monetary tightening. The outcomes from the sign identification confirm the micro evidence on inflation persistence. Moreover, our results show a greater persistence of inflation to monetary restriction than Cholesky identification presents. Overall, we find that a monetary innovation brings a decline of 30 basis point of GDP, this result is almost invariant across both prior and identification technique.
Volume (Year): 4 (2010)
Issue (Month): 2 (June)
|Contact details of provider:|| Postal: Opletalova 26, CZ-110 00 Prague|
Phone: +420 2 222112330
Fax: +420 2 22112304
Web page: http://ies.fsv.cuni.cz/
More information through EDIRC
|Order Information:|| Web: http://auco.cuni.cz/ Email: |
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.:
- Giuseppe De Arcangelis & Giorgio Di Giorgio, 1999. "Monetary policy shocks and transmission in Italy: A VAR analysis," Economics Working Papers 446, Department of Economics and Business, Universitat Pompeu Fabra.
- Fabio C. Bagliano & Carlo A. Favero, .
"Information from financial markets and VAR measures of monetary policy,"
135, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Bagliano, Fabio C. & Favero, Carlo A., 1999. "Information from financial markets and VAR measures of monetary policy," European Economic Review, Elsevier, vol. 43(4-6), pages 825-837, April.
- Rafiq, M.S. & Mallick, S.K., 2008. "The effect of monetary policy on output in EMU3: A sign restriction approach," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1756-1791, December.
When requesting a correction, please mention this item's handle: RePEc:fau:aucocz:au2010_139. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lenka Stastna)
If references are entirely missing, you can add them using this form.