IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The transmission of monetary shocks in the euro area: a VAR analysis based on euro-wide data

  • Jan Kakes
  • Sitikantha Pattanaik

Using area-wide data, we perform a VAR analysis to simulate the responses of inflation and real output following monetary shocks in the EMU. We find that short-term interest rate shocks have a significant impact on real activity, but hardly on prices. M3 shows a perverse short-term response to a monetary contraction, which should be taken into account when interpreting the reference value of money growth (the 'first pillar' of the Eurosystem's monetary strategy). Shocks to the effective exchange rate have a rapid impact on prices, money growth and real activity. As the exchange rate itself is hardly affected by monetary policy shocks, though, there is little scope for an exchange rate policy. Rather, these findings underscore the important role that the exchange rate should play as an information variable within the 'second pillar' of the monetary strategy. Finally, a comparison with the United States reveals that most impulse-responses are similar.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.dnb.nl/binaries/ms2000-02_tcm46-147291.pdf
Download Restriction: no

Paper provided by Netherlands Central Bank, Monetary and Economic Policy Department in its series MEB Series (discontinued) with number 2000-2.

as
in new window

Length:
Date of creation: Jan 2000
Date of revision:
Handle: RePEc:dnb:mebser:2000-2
Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam
Web page: http://www.dnb.nl/en/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Jeroen J. M. Kremers & Timothy D. Lane, 1990. "Economic and Monetary Integration and the Aggregate Demand for Money in the EMS," IMF Staff Papers, Palgrave Macmillan, vol. 37(4), pages 777-805, December.
  2. Christopher A. Sims, 1992. "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," Cowles Foundation Discussion Papers 1011, Cowles Foundation for Research in Economics, Yale University.
  3. Ramana Ramaswamy & Torsten Sløk, 1997. "The Real Effects of Monetary Policy in the European Union; What Are the Differences?," IMF Working Papers 97/160, International Monetary Fund.
  4. Anil K. Kashyap & Jeremy C. Stein, 1997. "The role of banks in monetary policy: a survey with implications for the European Monetary Union," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 2-18.
  5. Carlo Monticelli & Marc-Olivier Strauss-Kahn, 1992. "European integration and the demand for broad money," BIS Working Papers 18, Bank for International Settlements.
  6. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
  7. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
  8. P.J.G. Vlaar & H. Schuberth, 1999. "Monetary Transmission and Controllability of Money in Europe: aStructural Vector Error Correction Approach," DNB Staff Reports (discontinued) 36, Netherlands Central Bank.
  9. Fernando Barran & Virginie Coudert & Benoît Mojon, 1996. "The Transmission of Monetary Policy in the European Countries," Working Papers 1996-03, CEPII research center.
  10. Spencer Dale & Andrew Haldane, 1993. "Interest rates and the channels of monetary transmission: some sectoral estimates," Bank of England working papers 18, Bank of England.
  11. Carlo C. A. Winder & Martin M. G. Fase, 1998. "Wealth and the demand for money in the European union," Empirical Economics, Springer, vol. 23(3), pages 507-524.
  12. Garretsen, Harry & Swank, Job, 1998. "The Transmission of Interest Rate Changes and the Role of Bank Balance Sheets: A VAR-Analysis for the Netherlands," Journal of Macroeconomics, Elsevier, vol. 20(2), pages 325-339, April.
  13. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  14. Monticello, Carlo & Tristani, Oreste, 1999. "What does the single monetary policy do? A SVAR benchmark for the European Central Bank," Working Paper Series 0002, European Central Bank.
  15. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November.
  16. Rudi Dornbusch & Carlo Favero & Francesco Giavazzi, 1998. "Immediate challenges for the European Central Bank," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 15-64, 04.
  17. Stiglitz, Joseph E., 1992. "Capital markets and economic fluctuations in capitalist economies," European Economic Review, Elsevier, vol. 36(2-3), pages 269-306, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:dnb:mebser:2000-2. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.