A Cross-Country Analysis of Monetary Policy Effects on Prices

Czech Journal of Economics and Finance, Vol. 65, Issue 5, pp. 377-390, 2015

24 Pages Posted: 15 Aug 2014 Last revised: 7 Oct 2015

See all articles by Bruno Coric

Bruno Coric

University of Split Faculty of Economics

Lena Malešević Perović

University of Split - Faculty of Economics

Vladimir Simic

University of Split

Date Written: March 31, 2015

Abstract

What determines the size of monetary policy effects on prices? This is one of the crucial questions for the efficient conduct of monetary policy; hence this study investigates this issue by exploring variations in the responsiveness of prices to a monetary policy shock across 46 developed and developing countries. We first use a structural vector autoregression model to estimate monetary policy effects for each country separately. The estimated effects are thereafter treated as the dependent variable in a cross-country regression. The results suggest that the size of the short-run effect of a monetary policy shock on prices is significantly larger in countries with higher trade openness, more flexible exchange rate, larger and more developed banking sector, while the effect is smaller in countries with the English legal origin.

Keywords: Monetary policy effects, trade openness, financial openness, exchange rate regime.

JEL Classification: E52, F41

Suggested Citation

Coric, Bruno and Malešević Perović, Lena and Simic, Vladimir, A Cross-Country Analysis of Monetary Policy Effects on Prices (March 31, 2015). Czech Journal of Economics and Finance, Vol. 65, Issue 5, pp. 377-390, 2015. Available at SSRN: https://ssrn.com/abstract=2479958 or http://dx.doi.org/10.2139/ssrn.2479958

Bruno Coric (Contact Author)

University of Split Faculty of Economics ( email )

Split, HR-21000
Croatia

Lena Malešević Perović

University of Split - Faculty of Economics ( email )

Matice hrvatske 31
Split, 21000
Croatia

Vladimir Simic

University of Split ( email )

Livanjska ulica 5
Split, 21000
Croatia

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