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Monetary transmission in Spain: a structural cointegrated VAR approach

Author

Listed:
  • M. Camarero
  • J. Ordonez
  • C. R. Tamarit

Abstract

This paper analyses the monetary policy channels in Spain using a cointegrated structural VAR approach which explicitly accounts for endogenous policy reactions in a small open economy. Evidence is found of one cointegrating relation which is identified as a long-run money demand function. In addition, stability tests are applied to this relationship to assess whether there has been a change of monetary regime. The impulse-responses for the non-monetary shocks as well as the absence of the puzzles traditionally found in the empirical literature, suggest that the model specification identifies the monetary policy shocks correctly. Thus, according to our results, a monetary contraction causes a weak downward response in the price level, as well as an increase in both short and long-run nominal interest rates, a decrease in aggregate output and an exchange rate appreciation.

Suggested Citation

  • M. Camarero & J. Ordonez & C. R. Tamarit, 2002. "Monetary transmission in Spain: a structural cointegrated VAR approach," Applied Economics, Taylor & Francis Journals, vol. 34(17), pages 2201-2212.
  • Handle: RePEc:taf:applec:v:34:y:2002:i:17:p:2201-2212
    DOI: 10.1080/00036840210138419
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    References listed on IDEAS

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    1. Etsuro Shioji, 1997. "Spanish monetary policy: A structural VAR analysis," Economics Working Papers 215, Department of Economics and Business, Universitat Pompeu Fabra.
    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.
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    Cited by:

    1. Oxley, Les & Reale, Marco & Wilson, Granville Tunnicliffe, 2009. "Constructing structural VAR models with conditional independence graphs," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(9), pages 2910-2916.
    2. Haug, Alfred A. & Karagedikli, Ozer & Ranchhod, Satish, 2005. "Monetary policy transmission mechanisms and currency unions: A vector error correction approach to a Trans-Tasman currency union," Journal of Policy Modeling, Elsevier, vol. 27(1), pages 55-74, February.
    3. Kai Carstensen & Jan Hagen & Oliver Hossfeld & Abelardo Salazar Neaves, 2009. "Money Demand Stability And Inflation Prediction In The Four Largest Emu Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(1), pages 73-93, February.
    4. Daniela Sonedda, 2006. "A structural VAR approach on labour taxation policies," Applied Economics, Taylor & Francis Journals, vol. 38(1), pages 95-114.
    5. Keshab Bhattarai, 2008. "An empirical study of interest rate determination rules," Applied Financial Economics, Taylor & Francis Journals, vol. 18(4), pages 327-343.
    6. Amir Kia, 2006. "Economic policies and demand for money: evidence from Canada," Applied Economics, Taylor & Francis Journals, vol. 38(12), pages 1389-1407.
    7. D'Adamo, Gaetano, 2010. "Estimating Central Bank preferences in a small open economy: Sweden 1995-2009," MPRA Paper 26575, University Library of Munich, Germany.
    8. repec:tei:journl:v:11:y:2017:i:1:p:42-51 is not listed on IDEAS
    9. Par Osterholm, 2008. "A structural Bayesian VAR for model-based fan charts," Applied Economics, Taylor & Francis Journals, vol. 40(12), pages 1557-1569.

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