The monetary transmission mechanism in the euro area: evidence from VAR analysis

Peersman, Gert; Smets, Frank

doi:10.1017/cbo9780511492372.004

Cited by 265 publications

(332 citation statements)

References 203 publications

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“…Following an increase in the policy interest rate, prices tend to increase and IRFs thus exhibit the appearance of a "price-puzzle". This result contrasts with some studies on MPT mechanisms applied either to the euro area or to the CEECs (for instance, Peersman and Smets (2003) and EFN (2004) for the euro area; Gunduz (2003) for the Czech Republic; Creel and Levasseur (2004) for the Czech Republic, Hungary and Poland). Exceptions are Ganev et al (2002) in the Czech case; Anzuini and Levy (2004) for the Czech Republic and Poland (but the "price puzzle" is not robust to the adoption of a shorter sample period); Hericourt and Matei (2004) in the Czech case, and Jarocinski (2004) for a group of CEECs countries.…”

Section: The Baseline Varcontrasting

confidence: 81%

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Monetary Policy Transmission Mechanisms in the CEECs: How Important are the Differences with the Euro Area?

Creel

Levasseur²

2005

SSRN Journal

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We use a structural VAR model with short-term restrictions to investigate the relative importance of interest rate, exchange rate and credit channels in the monetary policy transmission (MPT) for the Czech Republic, Hungary and Poland over 1993:1-2004:3. Main results are as follows. First, in the three countries, following a positive shock on the interest rate, prices increase instead of decreasing, due to the immediate depreciation of the nominal exchange rate. The results thus exhibit an "exchange rate" puzzle conducing to the appearance of a "price-puzzle". Second, none channel is very powerful for the MPT in the three countries. Nevertheless, the exchange rate and the interest rate channels play a growing role over the recent period in Poland, compared with the same channels in the Czech Republic and Hungary. As nominal exchange rate fluctuations allow for greater real shocks dampening in Poland, the cost of entering EMU may be more costly for this country than for the Czech Republic or Hungary. * We are grateful to Benoît Usciati for his able research assistance. The usual disclaimer applies.

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Section: The Baseline Varcontrasting

confidence: 81%

“…Nevertheless, too short time series impede to make explicit cointegration estimations. Thus, we have decided to estimate the VAR in levels rather than in differences as in EFN (2004), Gunduz (2003) or Peersman and Smets (2003) for instance.…”

Section: The Var Specificationmentioning

confidence: 99%

Monetary Policy Transmission Mechanisms in the CEECs: How Important are the Differences with the Euro Area?

Creel

Levasseur²

2005

SSRN Journal

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“…They conclude that following a contractionary monetary policy shock economic activity declines quickly in a hump-shaped manner, while the negative reaction of the price level is more delayed and persistent. Similarly, Peersman & Smets (2001) provide evidence for the euro area as a whole, while Mojon & Peersman (2001) investigate the effects of monetary policy shocks in the individual countries of the euro area.…”

Section: Var Models and The Price Puzzlementioning

confidence: 99%

Evaluating changes in the monetary transmission mechanism in the Czech Republic

2013

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: We investigate the evolution of the monetary policy transmission mechanism in the Czech Republic over the 1996-2010 period by employing a time-varying parameters Bayesian vector autoregression model with stochastic volatility. We evaluate whether the response of GDP and the price level to exchange rate or interest rate shocks changes over time, with a focus on the period of the recent financial crisis. Furthermore, we augment the estimated system with a lending rate and credit growth to shed light on the relative importance of financial shocks for the macroeconomic environment. Our results suggest that output and prices have become increasingly responsive to monetary policy shocks, probably reflecting financial sector deepening, more persistent monetary policy shocks, and overall economic development associated with disinflation. On the other hand, exchange rate pass-through has weakened somewhat over time, suggesting improved credibility of inflation targeting in the Czech Republic with anchored inflation expectations. We find that credit shocks had a more sizeable impact on output and prices during the period of bank restructuring with difficult access to credit. In general, our results show that financial shocks are less important for the aggregate economy in an environment of a stable financial system. Terms of use: Documents in

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“…They find that monetary policy is best measured by innovation in the federal funds rate and monetary policy affects the real economic activity in the US and concluded that firstly, the funds rate is a good indicator of monetary policy, secondly, nominal interest rates are good forecast of real variables and lastly, monetary policy works in part by 4 affecting the composition of bank assets. Peersman and Smets (2001) measure the macroeconomic effects of an unanticipated change in monetary policy in Euro area by using VAR model and concluded that a rise in the short term nominal interest rate leads to a real appreciation of the exchange rate with a fall in output, while prices shows sluggish behavior and fall significantly after several quarters. Miyao (2002) examine the effects of monetary policy on macroeconomic variables over the last two decades in Japan and used VAR model.…”

Section: Empirical Literaturementioning

confidence: 99%

Measuring the effects of monetary policy in Pakistan: a factor-augmented vector autoregressive approach

Munir

Qayyum

2013

Empir Econ

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The monetary transmission mechanism in the euro area: evidence from VAR analysis

Cited by 265 publications

References 203 publications

Monetary Policy Transmission Mechanisms in the CEECs: How Important are the Differences with the Euro Area?

Monetary Policy Transmission Mechanisms in the CEECs: How Important are the Differences with the Euro Area?

Evaluating changes in the monetary transmission mechanism in the Czech Republic

Measuring the effects of monetary policy in Pakistan: a factor-augmented vector autoregressive approach

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