Please use this identifier to cite or link to this item:
Matĕjů, Jakub
Year of Publication: 
Series/Report no.: 
IES Working Paper 18/2013
This paper analyzes both the cross-sectional and time variation in aggregate monetary policy transmission from nominal short term interest rates to price level. Using Bayesian TVP-VARs where the structural interest rate shocks are identified by sign restrictions, we show that monetary policy transmission became stronger over the last decades. This applies both to developed and emerging economies. Monetary policy sacrifice ratios (the output costs of disination induced by monetary policy tightening) gradually decreased from their peak in the 1980's. Exploring the cross-country and time variation in panel regressions, we show that when a country adopted ination targeting regime, monetary transmission became stronger (by about 0.8 p.p. of price level response to 1 p.p. shock to the policy rate) and sacrifice ratios decreased. In periods of banking crises, the transmission from monetary policy interest rate shocks to prices is weaker (by about 1 p.p. of price level response to a 1 p.p. shock to the policy rate) and the related costs in output are higher. Further, countries with higher domestic credit to GDP have stronger transmission while countries with higher foreign debt seem to be less inuenced by domestic monetary policy.
monetary policy transmission
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
774.49 kB

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