The Transmission Mechanism of European Monetary Policy: Is There Heterogeneity? Is it Changing over Time?

Author/Editor:

Matteo Ciccarelli ; Alessandro Rebucci

Publication Date:

March 1, 2002

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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 investigates the transmission mechanism of monetary policy in the four largest euro area countries by means Bayesian estimation of dynamic econometric models. Based on pre-EMU evidence from Germany, France, Italy, and Spain, we show that: (i) there are differences in the timing of the effects of monetary policy on economic activity, but their cumulative impact after two years is rather homogeneous; (ii) the transmission mechanism seems to have changed over time in the run-up to EMU but its degree of heterogeneity has not decreased; (iii) the "European-wide" effects of monetary policy may have become faster in the second half of the 1990s. We interpret this evidence by conjecturing that the transmission mechanism of monetary policy had already become relatively homogenous in the second part of the 1990s.

Series:

Working Paper No. 2002/054

Subject:

Econometric analysis Econometric models Exchange rates Financial services Foreign exchange Monetary policy Monetary policy instruments Monetary transmission mechanism Short term interest rates

English

Publication Date:

March 1, 2002

ISBN/ISSN:

9781451847529/1018-5941

Stock No:

WPIEA0542002

Pages:

42

Please address any questions about this title to publications@imf.org