Interest rates and structural shocks in European transition economies

Rajmund Mirdala ()

Business and Economic Horizons (BEH), 2015, vol. 10, issue 4, 305-319

Abstract: European transition economies are still suffering from negative implications of economic crisis. Significant decrease in the key interest rates was followed by reduced maneuverability of central banks in providing incentives into real economies. Responsiveness of short-term interest rates to the structural shocks provides unique platform to investigate sources of their unexpected volatility and associated effects on monetary policy decision making. Moreover, sources of interest rates volatility may help to reveal side effects of the exchange rate regime choice. In the paper we analyze sources of the short-term nominal interest rates volatility in ten European transition economies by employing SVAR methodology. We observed unique patterns of the short-term interest rates responsiveness in countries with different exchange rate arrangements that contributes to the fixed versus flexible exchange rate dilemma.

Keywords: Interest rates; structural shocks; exchange rate arrangements; economic crisis; VAR; impulse-response function (search for similar items in EconPapers)
JEL-codes: E43 F41 G32 (search for similar items in EconPapers)
Date: 2015
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Related works:
Working Paper: Interest Rates and Structural Shocks in European Transition Economies (2014)
Journal Article: Interest rates and structural shocks in European transition economies
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Persistent link: https://EconPapers.repec.org/RePEc:pdc:jrnbeh:v:10:y:2015:i:4:p:305-319

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