Do Euro Area Countries Respond Asymmetrically to the Common Monetary Policy?
36 Pages Posted: 16 Jul 2013
Date Written: July 12, 2013
We investigate the possible existence of asymmetries among Euro Area countries’ reactions to the European Central Bank monetary policy. Our analysis is based on a Structural Dynamic Factor model estimated on a large panel of Euro Area quarterly variables. Although the introduction of the euro has changed the monetary transmission mechanism in the individual countries towards a more homogeneous response, we nevertheless find that differences remain between Northern and Southern Europe in terms of prices and unemployment. These results are the consequence of country specific structures, not of European Central Bank policies.
Keywords: monetary policy transmission, asymmetric effects, European Monetary Union, Structural Dynamic Factor model
JEL Classification: C32, E32, E52
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