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European integration and monetary transmission mechanisms: the case of Italy

  • Katarina Juselius

    (Institute of Economics, University of Copenhagen, Studiestraede 6, DK-1455, Copenhagen K, Denmark)

The focus in this paper is on the monetary transmission mechanism in Italy and how it has changed with the increased independence of the Italian Central Bank and the increasingly fixed exchange rates of the ERM. The sample period 1974-1994 is divided into two parts approximately corresponding to the different systems. Based on a VAR model for money, income, prices, and interest rates the cointegration properties of the data in nominal and real terms are analysed. Long-run price homogeneity is empirically rejected and the economic and econometric consequences for a real money analysis are described. Altogether we find little evidence that the use of M2 and the short interest rate as intermediate targets has effectively controlled price inflation in this period. Copyright © 2001 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 16 (2001)
Issue (Month): 3 ()
Pages: 341-358

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Handle: RePEc:jae:japmet:v:16:y:2001:i:3:p:341-358
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  1. Johansen, Søren, 1992. "A Representation of Vector Autoregressive Processes Integrated of Order 2," Econometric Theory, Cambridge University Press, vol. 8(02), pages 188-202, June.
  2. Katarina Juselius & Juan Toro, 1999. "The Effect of Joining the EMS: Monetary Transmission Mechanisms in Spain," Discussion Papers 99-22, University of Copenhagen. Department of Economics.
  3. Katarina Juselius, 1998. "Changing monetary transmission mechanisms within the EU," Empirical Economics, Springer, vol. 23(3), pages 455-481.
  4. Angelini, P. & Hendry, D.F. & Rinaldi, R., 1993. "An Econometric Analysis of Money Demand in Italy," Papers 219, Banca Italia - Servizio di Studi.
  5. Johansen, Soren & Juselius, Katarina, 1994. "Identification of the long-run and the short-run structure an application to the ISLM model," Journal of Econometrics, Elsevier, vol. 63(1), pages 7-36, July.
  6. Johansen, S., 1991. "A Statistical Analsysis of Cointegration for I(2) Variables," Papers 77, Helsinki - Department of Economics.
  7. Paruolo, Paolo, 1996. "On the determination of integration indices in I(2) systems," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 313-356.
  8. M. Sarcinelli, 1995. "Italian monetary policy in the '80s and '90s: the revision of the modus operandi," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 48(195), pages 397-422.
  9. Rahbek, Anders & Christian Kongsted, Hans & Jorgensen, Clara, 1999. "Trend stationarity in the I(2) cointegration model," Journal of Econometrics, Elsevier, vol. 90(2), pages 265-289, June.
  10. Juselius, Katarina, 1992. "Domestic and foreign effects on prices in an open economy: The case of Denmark," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 401-428, August.
  11. M. Sarcinelli, 1995. "Italian monetary policy in the '80s and '90s: the revision of the modus operandi," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 48(195), pages 397-422.
  12. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
  13. repec:cup:etheor:v:8:y:1992:i:2:p:188-202 is not listed on IDEAS
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