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Measuring Euro Area Monetary Policy Transmission in a Structural Dynamic Factor Model

Author

Listed:
  • Matteo Barigozzi
  • Antonio M. Conti
  • Matteo Luciani

Abstract

We study the effects of euro area common monetary policy by means of a structural dynamic factor model estimated on a large panel of euro area quarterly series. While we estimate a flat response of prices to a monetary policy shock, which we explain as aggregation of heterogeneous country-specific responses, we find no relevant asymmetries between countries in terms of output reaction. However, for both Spain and Italy, we find asymmetries in consumption, investment and unemployment. The introduction of the single currency in 1999 has helped reducing asymmetries in price responses but not in consumption and investment.

Suggested Citation

  • Matteo Barigozzi & Antonio M. Conti & Matteo Luciani, 2011. "Measuring Euro Area Monetary Policy Transmission in a Structural Dynamic Factor Model," European Economy - Economic Papers 2008 - 2015 441, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0441
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    File URL: http://ec.europa.eu/economy_finance/publications/economic_paper/2011/ecp441_en.htm
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    Cited by:

    1. Catherine Prettner & Klaus Prettner, 2012. "After Two Decades of Integration: How Interdependent are Eastern European Economies and the Euro Area?," EcoMod2012 4421, EcoMod.
    2. Konstantins Benkovskis & Andrejs Bessonovs & Martin Feldkircher & Julia Wörz, 2011. "The Transmission of Euro Area Monetary Shocks to the Czech Republic, Poland and Hungary: Evidence from a FAVAR Model," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 8-36.
    3. Keppel, Catherine & Prettner, Klaus, 2015. "How interdependent are Eastern European economies and the Euro area?," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 18-31.

    More about this item

    JEL classification:

    • 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
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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