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An Empirical Investigation of the Effects of Monetary Policy Shocks on the Italian Economy

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  • Marcellino, Massimiliano
  • Tornese, Tommaso

Abstract

We assess empirically the effects of monetary policy shocks on the Italian economy through the lenses of a heteroskedastic SVAR model. The identifying information provided by the time variation in the volatility of the structural shocks is complemented with sign and narrative restrictions. The presence of heteroskedasticty is strongly supported by the data and sharpens significantly the uncertainty about IRFs. Our results show that monetary policy contractions reduce inflation and output growth, generating a significant increase in the Corporate Bond Spread. On the other hand, the response of the Euro-Dollar exchange rate and the Italy-Germany sovereign spread is not significantly affected.

Suggested Citation

  • Marcellino, Massimiliano & Tornese, Tommaso, 2025. "An Empirical Investigation of the Effects of Monetary Policy Shocks on the Italian Economy," CEPR Discussion Papers 20661, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20661
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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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