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Transmission Effects in the Presence of Structural Breaks: Evidence from South-Eastern European Countries

  • Minoas Koukouritakis

    ()

    (Department of Economics, University of Crete, Greece)

  • Athanasios Papadopoulos

    ()

    (Department of Economics, University of Crete, Greece)

  • Andreas Yannopoulos

    ()

    (Department of Economics, University of Crete)

In this paper, we investigate the monetary transmission mechanism through interest rate and real effective exchange rate channels, for five South-Eastern European countries, namely Bulgaria, Croatia, Greece, Romania and Turkey. Recent unit root and cointegration techniques in the presence of structural breaks in the data have been used in the analysis. The empirical results validate the existence of a valid long-run relationship, with parameter constancy, for each of the five sample countries. Additionally, the estimated impulse response functions regarding the monetary variables and the real effective exchange rate converge and follow a reasonable pattern in all cases.

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Paper provided by University of Crete, Department of Economics in its series Working Papers with number 1303.

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Length: 37 pages
Date of creation: 01 Feb 2013
Date of revision:
Handle: RePEc:crt:wpaper:1303
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  1. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission in Central and Eastern Europe: Gliding on a Wind of Change," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 44-87.
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  9. Sander, Harald & Kleimeier, Stefanie, 2004. "Convergence in euro-zone retail banking? What interest rate pass-through tells us about monetary policy transmission, competition and integration," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 461-492, April.
  10. Hakan Kara & Hande Kucuk Tuger & Umit Ozlale & Burc Tuger & Devrim Yavuz & Eray M. Yucel, 2005. "Exchange Rate Pass-Through in Turkey : Has it Changed and to What Extent?," Working Papers 0504, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  11. Coricelli, Fabrizio & Égert, Balázs & MacDonald, Ronald, 2006. "Monetary transmission mechanism in Central and Eastern Europe: Gliding on a wind of change," BOFIT Discussion Papers 8/2006, Bank of Finland, Institute for Economies in Transition.
  12. Saikkonen, Pentti & Lutkepohl, Helmut, 2000. "Testing for the Cointegrating Rank of a VAR Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(4), pages 451-64, October.
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  15. Jesus Crespo Cuaresma & Balázs Égert & Thomas Reininger, 2006. "Interest Rate Pass-Through in Central and Eastern Europe: Reborn from Ashes Merely to Pass Away?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 88-111.
  16. H. Lütkepohl & P. Saikkonen, 1997. "Testing for the Cointegrating Rank of a VAR Process with a Time Trend," SFB 373 Discussion Papers 1997,79, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  17. Dubravko Mihaljek & Marc Klau, 2001. "A note on the pass-through from exchange rate and foreign price changes to inflation in selected emerging market economies," BIS Papers chapters, in: Bank for International Settlements (ed.), Modelling aspects of the inflation process and the monetary transmission mechanism in emerging market countries, volume 8, pages 69-81 Bank for International Settlements.
  18. Perron, P, 1993. "Erratum [The Great Crash, the Oil Price Shock and the Unit Root Hypothesis]," Econometrica, Econometric Society, vol. 61(1), pages 248-49, January.
  19. Lütkepohl, Helmut & Saikkonen, Pentti & Trenkler, Carsten, 2000. "Comparison of tests for the cointegrating rank of a VAR process with a structural shift," SFB 373 Discussion Papers 2000,10, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  20. Saikkonen, Pentti & L tkepohl, Helmut, 2000. "Testing For The Cointegrating Rank Of A Var Process With An Intercept," Econometric Theory, Cambridge University Press, vol. 16(03), pages 373-406, June.
  21. Jesús Crespo-Cuaresma & Balázs Égert & Thomas Reininger, 2004. "Interest Rate Pass-Through in New EU Member States: The Case of the Czech Republic, Hungary and Poland," William Davidson Institute Working Papers Series 2004-671, William Davidson Institute at the University of Michigan.
  22. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
  23. de Bondt, Gabe, 2002. "Retail bank interest rate pass-through: new evidence at the euro area level," Working Paper Series 0136, European Central Bank.
  24. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission Mechanism in Central & Eastern Europe: Gliding on a Wind of Change," William Davidson Institute Working Papers Series wp850, William Davidson Institute at the University of Michigan.
  25. Korhonen, Iikka & Wachtel, Paul, 2005. "A note on exchange rate pass-through in CIS countries," BOFIT Discussion Papers 2/2005, Bank of Finland, Institute for Economies in Transition.
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