Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/269103 
Year of Publication: 
2022
Series/Report no.: 
ECB Working Paper No. 2696
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We investigate the factors driving current account and monetary policy developments in the euro area. We estimate an open-economy structural vector autoregression (VAR) model with zero and sign restrictions derived from a multi-country dynamic stochastic general equilibrium (DSGE) model to identify relevant shocks and analyse their impact on the current account and interest rate. Examining the VAR impulse responses for Germany, Italy and Spain we find that investment shocks and preference shocks drive the current account and interest rates in the opposite directions. By contrast, external demand shocks and productivity shocks cause both the current account balance and interest rate to move in the same direction. We also provide evidence for spillovers to the euro area from US preference shocks and US interest rate policy shocks.
Subjects: 
current account
monetary policy
macroeconomic shocks
JEL: 
E32
F32
F45
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-5281-1
Document Type: 
Working Paper

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