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Shadow rates and spillovers across the Eurozone: a spatial dynamic panel model

Cristiana Fiorelli (), Alfredo Cartone and Matteo Foglia
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Cristiana Fiorelli: University of Rome Tor Vergata
Alfredo Cartone: G. d’Annunzio University of Chieti-Pescara
Matteo Foglia: G. d’Annunzio University of Chieti-Pescara

Empirica, 2021, vol. 48, issue 1, No 10, 223-245

Abstract: Abstract In this paper, we focus on the effect of spillovers in monetary policy in the period 2004–2017. Firstly, we calculate shadow rates that measure the monetary stances for each country analysed. Then, by using the approach of spatial dynamic panel, we account for the presence of potential spillovers in the Eurozone, both in the long and short run, while controlling for the main channels regulating the monetary stances. Results confirm that monetary policy is largely affected by the presence of spillovers due to proximity in the business cycles and this effect should be considered to manage the effects of monetary policy in different European economies.

Keywords: Shadow rate; Spatial panel; Spatial dependence; Business cycle (search for similar items in EconPapers)
JEL-codes: C23 E42 E52 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10663-020-09483-5

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