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A Cross-Country Analysis of Monetary Policy Effects on Prices

Author

Listed:
  • Bruno Coric

    (Faculty of Economics, University of Split)

  • Lena Malesevic Perovic

    (Faculty of Economics, University of Split)

  • Vladimir Simic

    (Faculty of Economics, University of Split)

Abstract

What determines the size of monetary policy effects on prices? This is one of the crucial questions for the efficient conduct of monetary policy. Therefore, this study investigates this issue by exploring variations in the responsiveness of prices to a monetary policy shock across 46 developed and developing countries. We first use a structural vector autoregression model to estimate monetary policy effects for each country separately. The estimated effects are thereafter treated as the dependent variable in a cross-country regression. The results suggest that the size of the short-run effect of a monetary policy shock on prices is significantly larger in countries with higher trade openness, a more flexible exchange rate, and a larger and more developed banking sector, while the effect is smaller in countries with the English legal origin.

Suggested Citation

  • Bruno Coric & Lena Malesevic Perovic & Vladimir Simic, 2015. "A Cross-Country Analysis of Monetary Policy Effects on Prices," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 65(5), pages 377-390, October.
  • Handle: RePEc:fau:fauart:v:65:y:2015:i:5:p:377-390
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    References listed on IDEAS

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    More about this item

    Keywords

    monetary policy effects; trade openness; financial openness; exchange rate regime;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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