Aspects of the Monetary Transmission Mechanism Under Exchange Rate Targeting: The Case of France

Author/Editor:

Joaquim Vieira Ferreira Levy ; Ioannis Halikias

Publication Date:

April 1, 1997

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines monetary transmission in France using the vector autoregression methodology. Interest rates are decomposed into external and domestic components, and a nonrecursive contemporaneous structure is used to identify the system. Innovations in the external component are found to have a significant impact on economic activity, while innovations in the domestic premium have a statistically negligible effect, suggesting that interest rate hikes in defense of the franc may have had a smaller impact on the economy than usually thought. The paper also discusses some implications of Economic and Monetary Union and provides evidence concerning the importance of the credit channel in France.

Series:

Working Paper No. 1997/044

Subject:

Credit Econometric analysis Exchange rates Financial services Foreign exchange Monetary policy Monetary transmission mechanism Money Short term interest rates Vector autoregression

English

Publication Date:

April 1, 1997

ISBN/ISSN:

9781451974751/1018-5941

Stock No:

WPIEA0441997

Pages:

38

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