Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/129618 
Year of Publication: 
2016
Series/Report no.: 
Kiel Working Paper No. 2033
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
I analyze spillover effects from Euro area monetary policy shocks to thirteen EU countries outside the Euro area, i.e., ten countries from Central and Eastern Europe (CEE) and three Western EU members. The analysis is based on a FAVAR model with two blocks which exploits a large cross-country data set covering real activity variables, prices and financial variables. An expansionary Euro area monetary policy shock raises production in most non-Euro area countries. Somewhat larger and more instantaneous responses of production are observed in small open economies with fixed exchange rate regimes, where foreign demand effects are particularly strong. In addition, a Euro area monetary expansion leads to declines in interest rates and reductions in uncertainty in most non-Euro area countries. The spillovers on uncertainty are more pronounced in economies with flexible exchange rates, where the degree of financial market openness tends to be higher and where exchange rate appreciations further enhance risk taking by cushioning debt burdens from foreign currency loans. Finally, spillover effects on prices are heterogeneous across countries and behave asymmetrically in most CEE countries.
Subjects: 
monetary policy
Euro area
Central and Eastern Europe
exchange rate regime
financial transmission
FAVAR
JEL: 
C33
E52
E58
F42
Document Type: 
Working Paper

Files in This Item:
File
Size
977.51 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.