The Impact of Monetary Policy and Exchange Rate Shocks in Poland: Evidence from a Time-Varying VAR

37 Pages Posted: 13 Mar 2014

See all articles by Olga Arratibel

Olga Arratibel

European Central Bank (ECB)

Henrike Michaelis

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Date Written: January 27, 2014

Abstract

This paper follows the Bayesian time-varying VAR approach with stochastic volatility developed by Primiceri (2005), to analyse whether the reaction of output and prices to interest rate and exchange rate shocks has changed across time (1996-2012) in the Polish economy. The empirical findings show that: (1) output appears more responsive to an interest rate shock at the beginning of our sample. Since 2000, absorbing this shock has become less costly in terms of output, notwithstanding some reversal since the beginning of the global financial crisis. The exchange rate shock also has a time-varying effect on output. From 1996 to 2000, output seems to decline, whereas for periods between 2000 and 2008 it has a positive significant effect. (2) Consumer prices appear more responsive to an interest rate shock during the first half of our sample, when Poland experienced high inflation. The impact of an exchange rate shock on prices seems to slightly decrease across time.

Keywords: Bayesian time-varying parameter VAR, monetary policy transmission, exchange rate pass-through

JEL Classification: C30, E44, E52, F41

Suggested Citation

Arratibel, Olga and Michaelis, Henrike, The Impact of Monetary Policy and Exchange Rate Shocks in Poland: Evidence from a Time-Varying VAR (January 27, 2014). ECB Working Paper No. 1636, Available at SSRN: https://ssrn.com/abstract=2385927 or http://dx.doi.org/10.2139/ssrn.2385927

Olga Arratibel (Contact Author)

European Central Bank (ECB) ( email )

Eurotower
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Henrike Michaelis

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

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