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Monetary policy transmission mechanisms in the CEECs: How important are the differences with the euro area?

Jerome Creel and Sandrine Levasseur

No 2005-02, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: We use a structural VAR model with short-term restrictions to investigate the relative importance of interest rate, exchange rate and credit channels in the monetary policy transmission (MPT) for the Czech Republic, Hungary and Poland over 1993:1-2004:3. Main results are as follows. First, in the three countries, following a positive shock on the interest rate, prices increase instead of decreasing, due to the immediate depreciation of the nominal exchange rate. The results thus exhibit an "exchange rate" puzzle conducing to the appearance of a "price-puzzle". Second, none channel is very powerful for the MPT in the three countries. Nevertheless, the exchange rate and the interest rate channels play a growing role over the recent period in Poland, compared with the same channels in the Czech Republic and Hungary. As nominal exchange rate fluctuations allow for greater real shocks dampening in Poland, the cost of entering EMU may be more costly for this country than for the Czech Republic or Hungary.

Keywords: monetary policy transmission; VAR models; exchange rate regimes (search for similar items in EconPapers)
JEL-codes: E52 E58 F47 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac, nep-mon and nep-tra
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Related works:
Journal Article: Monetary Policy Transmission Mechanisms in the CEECs: How Important are the Differences with the Euro Area? (2007)
Working Paper: Monetary policy transmission mechanisms in the CEECs: How important are the differences with the euro area? (2007)
Working Paper: Monetary policy transmission mechanisms in the CEECs: How important are the differences with the euro area? (2007)
Working Paper: Monetary policy transmission mechanisms in the CEECs: How important are the differences with the euro area? (2005) Downloads
Working Paper: Monetary policy transmission mechanisms in the CEECs: How important are the differences with the euro area? (2005) Downloads
Working Paper: Monetary policy transmission mechanisms in the CEECs: How important are the differences with the euro area? (2005) Downloads
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