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Shadow rates and spillovers across the Eurozone: a spatial dynamic panel model

Author

Listed:
  • Cristiana Fiorelli

    (University of Rome Tor Vergata)

  • Alfredo Cartone

    (G. d’Annunzio University of Chieti-Pescara)

  • Matteo Foglia

    (G. d’Annunzio University of Chieti-Pescara)

Abstract

In this paper, we focus on the effect of spillovers in monetary policy in the period 2004–2017. Firstly, we calculate shadow rates that measure the monetary stances for each country analysed. Then, by using the approach of spatial dynamic panel, we account for the presence of potential spillovers in the Eurozone, both in the long and short run, while controlling for the main channels regulating the monetary stances. Results confirm that monetary policy is largely affected by the presence of spillovers due to proximity in the business cycles and this effect should be considered to manage the effects of monetary policy in different European economies.

Suggested Citation

  • Cristiana Fiorelli & Alfredo Cartone & Matteo Foglia, 2021. "Shadow rates and spillovers across the Eurozone: a spatial dynamic panel model," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(1), pages 223-245, February.
  • Handle: RePEc:kap:empiri:v:48:y:2021:i:1:d:10.1007_s10663-020-09483-5
    DOI: 10.1007/s10663-020-09483-5
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    More about this item

    Keywords

    Shadow rate; Spatial panel; Spatial dependence; Business cycle;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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