 Spillover effects from Euro area monetary policy across Europe: A factor-augmented VAR approachJournal of International Money and Finance, 2017, vol. 72, issue C, 127-147 Abstract: I analyze spillover effects from a Euro area monetary policy shock to fourteen European countries outside the Euro area. The analysis is based on a factor-augmented VAR model with two blocks, which exploits a large cross-country data set. After a Euro area monetary policy expansion, production increases in most non-Euro area countries, whereas short-term interest rates and financial uncertainty decline. These effects are on average comparable to the responses in the aggregate Euro area. However, the size of spillover effects varies with country characteristics. Spillovers on production are larger in non-Euro area economies with higher trade openness, whereas financial variables react to a higher extent in countries with higher financial integration. Regarding the exchange rate regime, countries with fixed exchange rates show stronger spillovers both in terms of production and interest rates. Finally, prices increase in Western European economies outside the Euro area, but decline or do not respond in Central and Eastern Europe. Keywords: Monetary policy; Euro area; Central and Eastern Europe; Exchange rate regime; Factor-augmented VAR (FAVAR) (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:72:y:2017:i:c:p:127-147 DOI: 10.1016/j.jimonfin.2017.01.003 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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