An EMU with Different Transmission Mechanisms

Empirica, 1999

JCMS: Journal of Common Market Studies, 2004

Journal of Economic Integration, 2009

2011

The introduction of the euro represented a major change in the monetary policy regime of several European economies in the last decade. Such a change induces changes in agents' behaviour. Thus there are two major questions: How quickly do agents in these economies adapt to the new policy regime, and, related to the first question, do people in a common monetary currency area behave similarly once the common currency area is established? This thesis tries to provide answers to both questions using the introduction of the common currency as a natural experiment. The first essay studies the effects of monetary policy in individual EMU member states in the first decade of the euro. Using SVAR country models for the sample starting in 1999Q1, we find a relatively homogeneous transmission of monetary policy to output, despite some adjustment mechanisms in some member countries. The reaction to external shocks appears to be homogeneous for the euro area and its member states in the fir...

2005

Economics Letters, 2001

Monetary Economics, 2003

We examine the euro area monetary policy transmission process using post-1999 data, with two main questions in mind: has it changed after ­ and because of ­ EMU and, if so, is it becoming homogeneous across countries. Given the data limitations, we concentrate on three blocks of transmission: the banking, interest-rate and asset-market channels. We find evidence that the transmission through banks has become more potent and homogeneous across countries because of EMU. On the financial-market channels, our evidence is somewhat weaker but suggestive. The interest-rate channel appears to have changed even before EMU, and to now affect national economies in a broadly similar way. The asset-market channel (proxied by the stock-market effects of monetary policy) also seems to work rather homogeneously across national markets (no comparison with pre-EMU is available here). A positive answer to both questions raised above represents, in our view, the best working hypothesis under current kn...

1998

This paper re-evaluates the estimation of monetary policy transmission. Within the Structural VAR framework, five methodological points are identified, recognition of which can help to improve the reliability and credibility of estimates. The findings of the methodological analysis are then applied to the estimation of models for thirteen European countries. Results show that considerable differences in the transmission mechanism exist between these economies, mainly in intensity, but also in timing. Michael Ehrmann Istituto Universitario Europeo (ECO) Via dei Roccettini 9 I-50016 San Domenico di Fiesole Italy Email: ehrmann@datacomm.iue.it Fax: +39 55 599887 I would like to thank Mike Artis, Katarina Juselius and Juan Toro for helpful comments and suggestions, as well as Carlo Favero for his discussion at the 1998 Banca d'Italia/IGIER conference on the ESCB. Also, I am grateful to Henrik Hansen and Anders Warne for providing me with their computer code. All errors are my respon...

Macroeconomic Dynamics, 2019

We build a two-country New-Keynesian DSGE model of a Currency Union to study the effects of fiscal policy coordination, by evaluating the stabilization properties and welfare implications of different fiscal policy scenarios. Our main findings are that a government spending rule which targets the net exports gap rather than the domestic output gap produces more stable dynamics and that consolidating government budget constraints across countries with symmetric tax rate movements provides greater stabilization. A key role is played by the trade elasticity which determines the impact of the terms of trade on net exports. In fact, when goods are complements, the stabilization properties of coordinating fiscal policies are no longer supported. These findings point out to possible policy prescriptions for the Euro Area: to coordinate fiscal policies by reducing international demand imbalances, either by stabilizing trade flows across countries or by creating some form of Fiscal Union or ...

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