Bank interest rate pass-through in the euro area: a cross country comparison

Florin O. Bilbiie, André Meier () and Gernot J. Müller ()
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André Meier: International Monetary Fund, 700 19th Street NW, Washington, DC 20431, USA., http://www.imf.org/external/index.htm
Gernot J. Müller: Goethe University Frankfurt, Department of Economics, Mertonstrasse 17, D-60325 Frankfurt am Main, Germany, http://www.uni-frankfurt.de/english/index.html

No 582, Working Paper Series from European Central Bank

Abstract: Using vector autoregressions on U.S. time series for 1957-1979 and 1983-2004, we find government spending shocks to have stronger effects on output, consumption, and wages in the earlier sample. We try to account for this observation within a DSGE model featuring price rigidities and limited asset market participation. Specifically, we estimate the structural parameters of the model for both samples by matching impulse responses. Model-based counterfactual experiments suggest that increased asset market participation accounts for some of the changes in fiscal transmission. However, the key quantitative factor appears to be the more active monetary policy of the Volcker-Greenspan period. JEL Classification: E21; E62; E63.

Keywords: Government spending; asset market participation; fiscal policy; monetary policy; DSGE; vector autoregression; minimum distance estimation. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fmk, nep-mac and nep-mon
Date: 2006-01
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