Monetary policy transmission: the case of Lithuania

Julius Stakėnas () and Rasa Stasiukynaite ()
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Julius Stakėnas: Economics Department, Bank of Lithuania, Vilnius, Lithuania
Rasa Stasiukynaite: Economics Department, Bank of Lithuania, Vilnius, Lithuania

Baltic Journal of Economics, 2017, vol. 17, issue 1, 1-24

Abstract: We study the effect of a (standard) monetary policy shock in the euro area on the Lithuanian economy. We employ a structural vector autoregressive model incorporating variables from both the euro area and Lithuania. The model exhibits a block exogenous structure to account for the fact that Lithuania is a small economy. In general, we find that a monetary policy shock in the euro area has a stronger effect on the Lithuanian than it does on the euro area economy, though the effects are not statistically significant, preventing firm conclusions. We further broaden our analysis employing a panel vector autoregression (PVAR) model for the three Baltic states. PVAR model results suggest a stronger impact of monetary policy than that estimated using the Lithuanian model and a quite considerable degree of variation over time in the strength of monetary policy transmission.

Keywords: Monetary policy; euro area; SVAR; panel VAR (search for similar items in EconPapers)
JEL-codes: C32 C33 E31 E52 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bic:journl:v:17:y:2017:i:1:p:1-24

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