NDLI: State-Dependent Transmission of Monetary Policy in the Euro Area

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State-Dependent Transmission of Monetary Policy in the Euro Area

Content Provider	Scilit
Author	Burgard, Jan Pablo Neuenkirch, Matthias Nnckel, Matthias
Copyright Year	2016
Description	Journal: SSRN Electronic Journal In this paper, we estimate a logit mixture vector autoregressive (Logit-MVAR) model describing monetary policy transmission in the euro area over the period 1999–2015. MVARs allow us to differentiate between different states of the economy. In our model, the state weights are determined by an underlying logit model. In contrast to other classes of non-linear VARs, the regime affiliation is neither strictly binary nor binary with a (short) transition period. We show that monetary policy transmission in the euro area can indeed be described as a mixture of two states. The first (second) state with an overall share of 80% (20%) can be interpreted as a “normal state” (“crisis state”). In both states, output and prices are found to decrease after monetary policy shocks. During “crisis times,” the contraction is much stronger, as the peak effect is more than twice as large when compared to “normal times.” In contrast, the effect of monetary policy shocks is less enduring in crisis times. Both findings provide a strong indication that the transmission mechanism is indeed different for the euro area during times of economic and financial distress.
Related Links	http://www.uni-trier.de/fileadmin/fb4/prof/VWL/EWF/Research_Papers/2016-15.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2888335
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.2888335
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2016-12-21
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal History and Philosophy of Science
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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