An Empirical Investigation of the Effects of Monetary Policy Shocks on the Italian Economy

Massimiliano Marcellino and Tommaso Tornese

No 20661, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We assess empirically the effects of monetary policy shocks on the Italian economy through the lenses of a heteroskedastic SVAR model. The identifying information provided by the time variation in the volatility of the structural shocks is complemented with sign and narrative restrictions. The presence of heteroskedasticty is strongly supported by the data and sharpens significantly the uncertainty about IRFs. Our results show that monetary policy contractions reduce inflation and output growth, generating a significant increase in the Corporate Bond Spread. On the other hand, the response of the Euro-Dollar exchange rate and the Italy-Germany sovereign spread is not significantly affected.

Keywords: Heteroskedasticity (search for similar items in EconPapers)
JEL-codes: C11 C32 E32 E52 (search for similar items in EconPapers)
Date: 2025-09
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