Heterogeneity in Euro-Area Monetary Policy Transmission: Results from a Large Multi-Country BVAR Model

39 Pages Posted: 21 Jun 2016

See all articles by Martin Mandler

Martin Mandler

Deutsche Bundesbank - Economics Department; University of Giessen - Department of Economics

Michael Scharnagl

Deutsche Bundesbank

Ute B. Volz

affiliation not provided to SSRN

Date Written: 2016

Abstract

We study cross-country differences in monetary policy transmission across the large four euro-area countries (France, Germany, Italy and Spain) using a large Bayesian vector autoregressive model with endogenous prior selection. Drawing both on the posterior distributions of the cross-country differences in impulse responses as well as on a battery of other tests, we find real output to respond less negatively in Spain to monetary policy tightening than in the other three countries, while the decline in the price level is weaker in Germany. Bond yields rise more strongly and more persistently in France and Germany than in Italy and Spain.

Keywords: monetary policy, transmission mechanism, euro area, Bayesian vector autoregression

JEL Classification: C11, C54, E52

Suggested Citation

Mandler, Martin and Scharnagl, Michael and Volz, Ute B., Heterogeneity in Euro-Area Monetary Policy Transmission: Results from a Large Multi-Country BVAR Model (2016). Bundesbank Discussion Paper No. 03/2016, Available at SSRN: https://ssrn.com/abstract=2797076

Martin Mandler (Contact Author)

Deutsche Bundesbank - Economics Department ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

University of Giessen - Department of Economics ( email )

Licher Str. 62
Giessen, Hessen D-35394
Germany

Michael Scharnagl

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Ute B. Volz

affiliation not provided to SSRN

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