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Differences in monetary policy transmission? A case not closed
Author(s): Mads Kieler and Tuomas Saarenheimo
Differences in monetary policy transmission? A case not closed (2 MB)
The advent of EMU inspired a large literature searching for differences in the monetary policy transmission among European countries. Stylised facts seemed to arise, classifying the countries as having either rapid or slow transmission.
Our paper takes a comprehensive look at the existing empirical results, and finds few recurrent features supporting the presumed stylised facts. The econometric part examines the difficulties of meaningful identification of a monetary shock. The paper proposes a general approach to reducing the identification space through economic restrictions. We conclude that uncertainties in macro-econometric analysis are too large to allow establishing any statistically significant differences.
(European Economy. Economic Papers 132. November 1998.
Brussels. 44pp. Tab. Bibliogr. free.)