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Transmission of global financial shocks to EMU member states: The role of monetary policy and national factors

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  • Gelman, Maria
  • Jochem, Axel
  • Reitz, Stefan

Abstract

The paper analyses the transmission of global financial shocks to individual member states of the European Monetary Union (EMU), in which monetary policy is delegated to the ECB and financial markets are fully integrated. Using a panel VAR model, we show that the asymmetric effects of global shocks on member states are partly offset by the uniform access of commercial banks to the Eurosystem's open market operations in conjunction with the redistribution of liquidity via the TARGET mechanism. However, an appropriate policy mix of sound public finances, solid financial regulation and targeted macroprudential measures is necessary in order to safeguard macroeconomic sustainability without needing to manage capital flows.

Suggested Citation

  • Gelman, Maria & Jochem, Axel & Reitz, Stefan, 2016. "Transmission of global financial shocks to EMU member states: The role of monetary policy and national factors," Discussion Papers 23/2016, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:232016
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    Cited by:

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    2. Reitz, Stefan, 2016. "Auswirkungen des globalen Finanzzyklus auf den Euroraum," Kiel Insight 2016.6, Kiel Institute for the World Economy (IfW Kiel).
    3. Elena Pelinescu & Mihaela Simionescu, 2017. "The Effects of the Recent Economic and Financial Crisis on the Romanian Economy," Working papers Globalization - Economic, Social and Moral Implications, April 2017 15, Research Association for Interdisciplinary Studies.

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    More about this item

    Keywords

    monetary union; capital flows; global financial cycle; macroeconomic imbalances;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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