Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/27744 
Authors: 
Year of Publication: 
2009
Series/Report no.: 
Discussion Paper Series 1 No. 2009,18
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
This paper investigates the transmission of monetary policy in the euro area based on the factor augmented vector autoregressive approach of Bernanke, Boivin and Eliasz (2005) as well as on a standard VAR model. We focus on the reaction of monetary aggregates to a one-off monetary policy shock. We find that - as theory suggests - money growth is dampened by a restrictive monetary policy stance in the longer term. In the short-run, however, M3 growth may increase due to portfolio shifts caused by the rise in the short-term interest rate. This has consequences for the interpretation of money growth as an input for monetary policy decisions.
Subjects: 
Monetary policy transmission
FAVAR
VAR
money stock
euro area.
JEL: 
C32
E40
E52
Document Type: 
Working Paper

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