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The effects of monetary policy shocks on flow of funds: the case of Italy

Author

Listed:
  • Riccardo Bonci

    (Bank of Italy)

  • Francesco Columba

    (Bank of Italy)

Abstract

We study in a VAR model the effects of monetary policy shocks with new Italian flow of funds data for 1980-2002. First, our results are consistent with the literature, without being affected by commonly found puzzles. Second, new features of the transmission of monetary policy shocks to the Italian economy are provided. We do not find evidence in favour of financial frictions which would prevent firms from a prompt reduction of nominal expenditures. Households also quickly adjust their portfolios leading to a careful evaluation of the hypothesis underlying limited participation models. Finally, the public sector increases net borrowing after the shock, improving on puzzling opposite results in the literature

Suggested Citation

  • Riccardo Bonci & Francesco Columba, 2006. "The effects of monetary policy shocks on flow of funds: the case of Italy," Computing in Economics and Finance 2006 135, Society for Computational Economics.
  • Handle: RePEc:sce:scecfa:135
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    More about this item

    Keywords

    monetary policy; flow of funds; VAR;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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