The Real Effects of Monetary Policy in the European Union: What Are the Differences?

December 1, 1997

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

The main finding of this paper is that the European Union (EU) countries fall into two broad groups according to the effects of monetary policy adjustments on economic activity. Estimates based on a vector autoregression model indicate that the full effects of a contractionary monetary shock on output in one group of EU countries (Austria, Belgium, Finland, Germany, Netherlands, and United Kingdom) take roughly twice as long to occur, but are almost twice as deep as in the other group (Denmark, France, Italy, Portugal, Spain, and Sweden). The paper discusses the implications of these results for the effective conduct of monetary policy in the euro area.

Subject: Econometric analysis, Financial services, Monetary policy, Monetary policy frameworks, Monetary transmission mechanism, Short term interest rates, Vector autoregression

Keywords: country, effects of monetary policy, EMU, monetary policy, monetary policy action, Monetary policy frameworks, monetary policy innovation, monetary transmission mechanism, periphery of the EU, response of output, Short term interest rates, transmission mechanism, transmission of monetary policy, VAR approach, Vector autoregression, WP

Pages:
25
Volume:
1997
DOI:
https://doi.org/10.5089/9781451857719.001
Issue:
160
Series:
Working Paper No. 1997/160
Stock No:
WPIEA1601997
ISBN:
9781451857719
ISSN:
1018-5941

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