MONETARY POLICY TRANSMISSION MECHANISM AND TVP-VAR MODEL

Andreea A. Rosoiu
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Andreea A. Rosoiu: Faculty of Finance, Insurance, Banks and Stock Exchanges, The Academy of Economic Studies, Bucharest

Network Intelligence Studies, 2013, issue 2, 119-126

Abstract: The transmission of monetary policy to the economy is a subject of major importance for central banks because, by using these measures, central banks can achieve their purpose of ensuring price stability without neglecting the objective of sustainable economic growth. In order to analyze the evolution of the monetary policy transmission mechanism in Romania, a time varying structural vector autoregression model is estimated, by using a Markov Chain Monte Carlo algorithm for the posterior evolution. The conclusions of the empirical study are: both systematic and non-systematic monetary policy have changed during the investigated period of time, the systematic response of the interest rate to shocks in inflation and unemployment being faster over the recent period. Also, non-policy shocks seem more important than interest rate shocks in explaining inflation and unemployment evolution.

Keywords: Monetary policy; Transmission mechanism; Time varying structural vector autoregression model; Markov Chain Monte Carlo algorithm; Romania (search for similar items in EconPapers)
JEL-codes: C15 C82 E31 E52 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cmj:networ:y:2013:i:2:p:119-126

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