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International Monetary Transmission to the Euro Area: Evidence from the US, Japan and China

There are marked differences in the effect of increases in monetary aggregates in China, Japan and the U.S. on Euro area economic and financial variables over 1999-2012. Increases in monetary aggregates in China are associated with significant increases in the world price of commodities and with increases in Euro area inflation, industrial production and exports. Results are consistent with shocks to China’s M2 facilitating domestic growth with expansionary consequences for the Euro area economy. In contrast, increases in monetary aggregates in Japan are associated with significant appreciation of the Euro and decreases in Euro area industrial production and exports. Production of goods highly competitive with European goods in Japan and expenditure switching in Japan are consistent with the results. U.S. monetary expansion has relatively small effects on the Euro area over this period compared to results reported in the literature for earlier sample periods.

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File URL: http://eprints.utas.edu.au/16436/1/2013-03_International_monetary_transmission_29042013_final_version_(JIE).pdf
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Paper provided by University of Tasmania, School of Economics and Finance in its series Working Papers with number 16436.

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Length: 26 pages
Date of creation: 05 Aug 2013
Date of revision: 05 Aug 2013
Publication status: Published by the University of Tasmania. Discussion paper 2013-03
Handle: RePEc:tas:wpaper:16436
Contact details of provider: Postal: Private Bag 85, Hobart, Tasmania 7001
Phone: +61 3 6226 7672
Fax: +61 3 6226 7587
Web page: http://www.utas.edu.au/economics-finance/

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