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Spillovers from Euro Area Monetary Policy: A Focus on Emerging Europe

Sona Benecka, Ludmila Fadejeva and Martin Feldkircher
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Sona Benecka: Ceska Narodni Banka

No 2018/04, Working Papers from Latvijas Banka

Abstract: This paper investigates the international effects of a euro area monetary policy shock, focusing on countries from Central, Eastern, and Southeastern Europe (CESEE). To that end, we use a global vector autoregressive (GVAR) model and employ shadow rates as a proxy for the monetary policy stance during normal and zero-lower-bound periods. We propose a new way of modelling euro area countries in a multi-country framework, accounting for joint monetary policy, and a novel approach to simultaneously identifying shocks. Our results show that in most euro area and CESEE countries prices adjust and output falls in response to a euro area monetary tightening, but with a substantial degree of heterogeneity.

Keywords: euro area monetary policy; global vector autoregression; spillovers (search for similar items in EconPapers)
JEL-codes: C32 F44 E32 O54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-tra
Date: 2018-10-18
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