Asymmetric Monetary Policy Effects in Emu
University of Bonn, ZEI Working Paper No. B04-2002
27 Pages Posted: 20 Mar 2002
Date Written: March 2002
This paper uses a semi-structural dynamic modelling approach to investigate asymmetric monetary transmission in Europe. A system of equations containing reaction functions for monetary policy, output and inflation equations is simultaneously estimated for France, Germany, and Italy. Extensive cross equation tests show that relatively large differences in simulated impulse responses are still consistent with the notion that the transmission mechanism is homogeneous across the three major EMU countries. However, monetary policy impulses show a relatively stronger effect on the output gap in Italy and Germany. Out-of-sample tests do not find a structural break in the transmission mechanisms prior to EMU.
Keywords: European Monetary Union, Monetary Policy, Semi-structural modelling
JEL Classification: E52, F41
Suggested Citation: Suggested Citation