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Monetary policy transmission in the CEECs : revisited results using alternative econometrics

  • Jérôme Héricourt

    ()

    (TEAM)

This paper aims at providing better supported results regarding monetary policy transmission in Central and Eastern European countries (CEECs). In the general frame of VAR models, our study differs from previous research in two main respects. Firstly, we provide estimations that do not rely on the hypothesis of cointegration usually exploited in the related literature, but economically meaningless over less than ten years spans and statistically very fragile. Secondly, we present another set of results, relying on real GDP monthly data that have been rebuilt using the Chow and Lin (1971) method; this allows for an alternative to the traditional industrial production data, a partial and highly unstable proxy variable for output. These original methodological insights lead to results emphasizing the general prevalence of exchange rate and domestic credit channels for monetary policy transmission across the studied countries, despite some persistent national specificity. The empirical evidence also incites to be reasonably optimistic regarding the relevancy of a close integration of these countries into euro area.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2005/Bla05020.pdf
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Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number bla05020.

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Length: 51 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:mse:wpsorb:bla05020
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  1. Mojon, Benoît & Peersman, Gert, 2001. "A VAR description of the effects of monetary policy in the individual countries of the euro area," Working Paper Series 0092, European Central Bank.
  2. Jeffery D Amato & Stefan Gerlach, 2001. "Modelling the transmission mechanism of monetary policy in emerging market countries using prior information," 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 264-272 Bank for International Settlements.
  3. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 372-75, November.
  4. Wojciech Maliszewski, 2002. "Monetary Policy in Transition: Structural Econometric Modelling and Policy Simulations," CASE Network Studies and Analyses 0246, CASE-Center for Social and Economic Research.
  5. Sephton, Peter S. & Larsen, Hans K., 1991. "Tests of exchange market efficiency: fragile evidence from cointegration tests," Journal of International Money and Finance, Elsevier, vol. 10(4), pages 561-570, December.
  6. Jérôme Creel & Sandrine Levasseur, 2005. "Monetary policy transmission mechanisms in the CEECs: How important are the differences with the euro area?," Sciences Po publications 2005-02, Sciences Po.
  7. Wojciech Maliszewski, 1999. "VAR-ing Monetary Policy in Poland," CASE Network Studies and Analyses 0188, CASE-Center for Social and Economic Research.
  8. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
  9. Coricelli, Fabrizio & Jazbec, Bostjan, 2004. "Real exchange rate dynamics in transition economies," Structural Change and Economic Dynamics, Elsevier, vol. 15(1), pages 83-100, March.
  10. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
  11. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
  12. Kim, Soyoung & Roubini, Nouriel, 2000. "Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 561-586, June.
  13. Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics 9710, Faculty of Economics, University of Cambridge.
  14. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, vol. 36(5), pages 975-1000, June.
  15. Peter Christoffersen & Torsten Sløk & Robert Wescott, 2001. "Is inflation targeting feasible in Poland?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(1), pages 153-174, March.
  16. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  17. Elbourne, Adam & de Haan, Jakob, 2006. "Financial structure and monetary policy transmission in transition countries," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 1-23, March.
  18. repec:cup:cbooks:9780521783248 is not listed on IDEAS
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