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Monetary transmission in three central European economies: evidence from time-varying coefficient vector autoregressions

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  • Zsolt Darvas

    (Institute of Economics, Research Center for Economic and Regional Studies, Hungarian Academy of Science and Bruegel Brussels)

Abstract

We study the transmission of monetary policy to macroeconomic variables with structural time-varying coefficient vector autoregressions in the Czech Republic, Hungary and Poland, in comparison with that in the euro area. These three countries have experienced changes in monetary policy regimes and went through substantial structural changes, which call for the use of a time-varying parameter analysis. Our results indicate that the impact on output of a monetary shock changed over time. At the point of the last observation of our sample, the fourth quarter of 2011, among the three countries, monetary policy was most powerful in Poland and not much less strong than the transmission in the euro area. We discuss various factors that can contribute to differences in monetary transmission, such as financial structure, labour market rigidities, industry composition, exchange rate regime, credibility of monetary policy and trade openness.

Suggested Citation

  • Zsolt Darvas, 2012. "Monetary transmission in three central European economies: evidence from time-varying coefficient vector autoregressions," CERS-IE WORKING PAPERS 1219, Institute of Economics, Centre for Economic and Regional Studies.
  • Handle: RePEc:has:discpr:1219
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    References listed on IDEAS

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    More about this item

    Keywords

    monetary transmission; time-varying coefficient vector autoregressions; Kalman-filter;
    All these keywords.

    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
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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