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Asymmetric Monetary Policy Effects in EMU

  • Bernd Hayo

    (University of Essen)

  • Volker Clausen

    (University of Essen)

This paper uses a semi-structural dynamic modelling approach to investigate asymmetric monetary transmission in Europe. A system of equations containing reaction functions for monetary policy, output and inflation equations is simultaneously estimated for France, Germany, and Italy. Extensive cross equation tests show that relatively large differences in simulated impulse responses are still consistent with the notion that the transmission mechanism is homogeneous across the three major EMU countries. However, monetary policy impulses show a relatively stronger effect on the output gap in Italy and Germany. Out-of-sample tests do not find a structural break in the transmission mechanisms prior to EMU.

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File URL: http://128.118.178.162/eps/mac/papers/0203/0203003.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0203003.

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Length: 16 pages
Date of creation: 14 Mar 2002
Date of revision:
Handle: RePEc:wpa:wuwpma:0203003
Note: Type of Document - ; prepared on IBM PC; pages: 16; figures: included
Contact details of provider: Web page: http://128.118.178.162

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  1. Stephen Cecchetti & Michael Ehrmann, 2000. "Does Inflation Targeting Increase Output volatility? An International Comparison of Policy Maker's Preferences and Outcomes," Working Papers Central Bank of Chile 69, Central Bank of Chile.
  2. Gerlach, Stefan & Schnabel, Gert, 1999. "The Taylor Rule and Interest Rates in the EMU Area," CEPR Discussion Papers 2271, C.E.P.R. Discussion Papers.
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  6. Clausen, Volker & Wohltmann, Hans-Werner, 2002. "Monetary and fiscal policy dynamics in an asymmetric monetary union," IBES Diskussionsbeiträge 119, University of Duisburg-Essen, Institute of Business and Economic Studie (IBES).
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  10. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 0091, European Central Bank.
  11. Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
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  13. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary policy rules in practice," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  14. Hagen, Jurgen von & Fratianni, Michele, 1990. "German dominance in the EMS: evidence from interest rates," Journal of International Money and Finance, Elsevier, vol. 9(4), pages 358-375, December.
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  16. Wyplosz, Charles, 1989. "Asymmetry in the EMS: Intentional or systemic?," European Economic Review, Elsevier, vol. 33(2-3), pages 310-320, March.
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  18. Mojon, Benoît, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
  19. Aksoy, Yunus & De Grauwe, Paul & Dewachter, Hans, 2002. "Do asymmetries matter for European monetary policy?," European Economic Review, Elsevier, vol. 46(3), pages 443-469, March.
  20. Michael Ehrmann, 2000. "Comparing monetary policy transmission across European countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(1), pages 58-83, March.
  21. Leamer, Edward E, 1988. "Things That Bother Me," The Economic Record, The Economic Society of Australia, vol. 64(187), pages 331-35, December.
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