Economics at your fingertips  

Spillover effects from Euro area monetary policy across Europe: A factor-augmented VAR approach

Galina Potjagailo ()

Journal of International Money and Finance, 2017, vol. 72, issue C, 127-147

Abstract: I analyze spillover effects from a Euro area monetary policy shock to fourteen European countries outside the Euro area. The analysis is based on a factor-augmented VAR model with two blocks, which exploits a large cross-country data set. After a Euro area monetary policy expansion, production increases in most non-Euro area countries, whereas short-term interest rates and financial uncertainty decline. These effects are on average comparable to the responses in the aggregate Euro area. However, the size of spillover effects varies with country characteristics. Spillovers on production are larger in non-Euro area economies with higher trade openness, whereas financial variables react to a higher extent in countries with higher financial integration. Regarding the exchange rate regime, countries with fixed exchange rates show stronger spillovers both in terms of production and interest rates. Finally, prices increase in Western European economies outside the Euro area, but decline or do not respond in Central and Eastern Europe.

Keywords: Monetary policy; Euro area; Central and Eastern Europe; Exchange rate regime; Factor-augmented VAR (FAVAR) (search for similar items in EconPapers)
JEL-codes: C32 E52 F42 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-12-20
Handle: RePEc:eee:jimfin:v:72:y:2017:i:c:p:127-147