Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311153 
Year of Publication: 
2024
Series/Report no.: 
ECB Working Paper No. 2989
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper analyses how country-specific institutional quality shapes the impact of monetary policy on downside risks to GDP growth in the euro area. Using identified high-frequency shocks in a growth-at-risk framework, we show that monetary policy has a higher impact on downside risks in the short term than in the medium term. However, this result for the euro area average hides significant heterogeneity across countries. In economies with weak institutional quality, medium-term growth risks increase substantially following contractionary monetary policy shocks. In contrast, these risks remain relatively stable in countries with high institutional quality. This suggests that improvements in institutional quality could significantly enhance euro area countries' economic resilience and support the smooth transmission of monetary policy.
Subjects: 
Euro area
growth-at-risk
institutional quality
monetary policy transmission
JEL: 
C23
E52
F45
G28
O43
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6884-3
Document Type: 
Working Paper

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