A VAR Description of the Effects of Monetary Policy in the Individual Countries of the Euro Area

49 Pages Posted: 18 Mar 2002

See all articles by Benoit Mojon

Benoit Mojon

Banque de France

Gert Peersman

Ghent University - Department of Financial Economics

Date Written: December 2001

Abstract

This paper presents a complete set of results describing the effects of monetary policy in 10 countries of the Euro area for the pre-EMU period. For each country, we impose one of three identification schemes depending on its monetary integration with Germany, the nominal anchor of the ERM. The first identification scheme applies to Germany, the second to countries of the core EMS (Austria, Belgium and the Netherlands) and the third to all the other countries. An unexpected rise in the short-term interest rate leads to a decrease in GDP, (with investment and exports falling more than consumption) and a gradual decrease in prices for all countries. We also show that, given the width of the error bands around the estimate, we cannot reject that the effects of monetary policy on GDP and on prices are broadly similar in the individual countries of the Euro area.

Keywords: Euro area countries, monetary policy, VAR

JEL Classification: E52

Suggested Citation

Mojon, Benoit and Peersman, Gert, A VAR Description of the Effects of Monetary Policy in the Individual Countries of the Euro Area (December 2001). Available at SSRN: https://ssrn.com/abstract=303801 or http://dx.doi.org/10.2139/ssrn.303801

Benoit Mojon (Contact Author)

Banque de France ( email )

Paris
France

Gert Peersman

Ghent University - Department of Financial Economics ( email )

W. Wilsonplein 5D
Ghent, 9000
Belgium
+3292643514 (Phone)

HOME PAGE: www.feb.ugent.be/fineco/gert.html

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