THE EFFECTS OF MONETARY POLICY SHOCKS ON FLOW OF FUNDS:THE ITALIAN CASE

Riccardo Bonci and Francesco Columba

No 75, Money Macro and Finance (MMF) Research Group Conference 2006 from Money Macro and Finance Research Group

Abstract: We study in a VAR model the effects of monetary policy shocks with new Italian flow of funds data for 1980-2002. First, our results are consistent with the literature, without being affected by commonly found puzzles. Second, new features of the transmission of monetary policy shocks to the Italian economy are provided. We do not find evidence of financial frictions which prevent firms from reduction of nominal expenditures. Households quickly adjust portfolios leading to a careful evaluation of limited participation hypothesis. Finally, the public sector increases net borrowing after the shock, improving on puzzling opposite results in the literature.

Keywords: flow of funds; monetary policy; VAR. (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 2007-02-02
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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