Industry Effects of Monetary Policy in Spain

Abstract

Rodríguez-Fuentes C. J. and Padrón-Marrero D. Industry effects of monetary policy in Spain, Regional Studies. The aim of this paper is to analyse the presence of sectoral asymmetries in monetary policy transmission in Spain in the period before the introduction of the single monetary policy in Europe (1988–98). Monetary policy shocks are identified through both a standard vector auto-regression model (VAR-shock) and the specification of a reaction function (RF-shock) for the monetary authority in Spain. The responses of the different industrial branches with regard to the estimated monetary shocks are then analysed at national accounting sector and subsector levels. The results confirm the presence of significant differences in the sectoral responses with respect to national monetary shocks in Spain. In addition, the sectoral asymmetries found in the present study show a strong correlation with regard to the regional asymmetries found in a previous study.

Rodríguez-Fuentes C. J. et Padrón-Marrero D. Les effects de la politique monétaire sur le secteur industriel en Espagne, Regional Studies. Cet article cherche à analyser la présence des asymétries sectorielles dans la transmission de la politique monétaire en Espagne pendant la période qui a précédé l'établissement du système monétaire européen (de 1988 à 1998). On identifie les chocs de la politique monétaire à la fois par moyen d'un modèle d'auto-régression vectorielle type (choc-VAR) et de la spécification d'une fonction de réaction (RF-choc) pour les instances monétaires espagnoles. Dans le cadre des comptes de la nation et sur le plan sectoriel, il s'ensuit une analyse des réponses des divers secteurs industriels quant aux chocs monétaires approximatifs. Les résultats confirment d'importantes différences des réponses sectorielles quant aux chocs monétaires nationaux en Espagne. En outre, les asymétries sectorielles qui se présentent, sont en corrélation étroites avec les asymétries régionales qui se présentaient dans une étude antérieure.

Politique monétaire Effets industriels Chocs monétaires Espagne

Rodríguez-Fuentes C. J. und Padrón-Marrero D. Branchenspezifische Auswirkungen der Währungspolitik in Spanien, Regional Studies. In diesem Beitrag wird die Präsenz sektoraler Asymmetrien in der U¨bertragung der Währungspolitik in Spanien im Zeitraum vor der Einführung der einheitlichen Währungs-politik in Europa (1988–98) untersucht. Die Schocks in der Währungspolitik werden mit Hilfe eines Standardvektor-Autoregressionsmodells (VAR-Schock) sowie durch Spezifizierung einer Reaktionsfunktion (RF-Schock) für die spanische Währungsbehörde identifiziert. Anschließend werden die Reaktionen der verschiedenen Industriebranchen hinsichtlich der geschätzten Währungsschocks auf den Ebenen des nationalen Buchhaltungssektors und der Untersektoren analysiert. Unsere Ergebnisse bestätigen die Präsenz signifikanter Unterschiede hinsichtlich der sektoralen Reaktionen im Zusammenhang mit den nationalen Währungsschocks in Spanien. Darüber hinaus wiesen die in unserer Studie festgestellten sektoralen Asymmetrien eine starke Korrelation mit den in einer früheren Studie festgestellten regionalen Asymmetrien auf.

Währungspolitik Branchenspezifische Auswirkungen Währungsschocks Spanien

Rodríguez-Fuentes C. J. y Padrón-Marrero D. Los efectos de la política monetaria sobre la industria en España, Regional Studies. El objetivo de este artículo es analizar la presencia de las asimetrías sectoriales en la transmisión de la política monetaria en España durante el periodo antes de la introducción en Europa de la política monetaria única (1988–98). Identificamos los choques de la política monetaria a través de un modelo estándar vector de autorregresión (choque VAR) y la especificación de una función de reacción (choque RF) para la autoridad monetaria en España. Analizamos luego las respuestas de las diferentes ramas industriales con respecto a los choques monetarios estimados en el sector de contabilidad nacional y los niveles de subsectores. Nuestros resultados confirman la presencia de diferencias significativas en las respuestas sectoriales con respecto a los choques monetarios nacionales en España. Asimismo las asimetrías sectoriales de nuestro estudio muestran una fuerte correlación con las asimetrías regionales de un estudio previo.

Política monetaria Efectos en la industria Choques monetarios España

Keywords:

• Monetary policy
• Industry effects
• Monetary shocks
• Spain

Keywords:

• E52
• L60

Notes

1. Nevertheless, this hypothesis has been questioned by other authors, who point out that the shape of a monetary union also reinforces bilateral trade among its members. This effect would result in higher levels of correlation in their respective cycles and a lower probability of experiencing asymmetric shocks (Frankel and Rose, 1998).

2. The authors have not been able to include the services in their analysis due to a lack of statistics in Spain in this regard.

3. This result is unconvincing since Central Bank decisions will always cause a single (and common) monetary shock, which undoubtedly might produce different effects on certain sectors; but it is the response that might differ across sectors not the shock itself.

4. Nevertheless, Dedola and Lippi (2005, p. 1551) point out that the estimated parameter associated with the instantaneous response of the production sector monetary shock is not far from zero, and such an inconsistency would not be relevant in their model.

5. It is important to note that the present study is only considering the unanticipated monetary policy, that is, the monetary policy ‘surprises’ or exogenous shocks, which is common practice in the current empirical literature on sectoral effects of monetary policy (Ganley and Salmon, 1997; Hayo and Uhlenbrock, 1999/2000; Peersman and Smets, 2002; Dedola and Lippi, 2005). However, the present authors are aware that the monetary policy decisions also have a systematic component which is at least as important as the ‘monetary surprises’ (McCallum, 2001, p. 38), but its identification usually requires the estimation of structural models which are highly demanding in terms of data (not available to the authors).

6. The reasoning behind the inclusion of the German interest rate is to acknowledge Spain's membership in the European Monetary System (EMS) and the ‘anchoring’ role performed by the German economy within the EMS. The authors also considered the insertion of the M3 due to the importance attributed by the Bank of Spain to monetary aggregates (in its monetary strategy) during most of the period under study (Bank of Spain, 1997, pp. 89–119).

7. The reasoning for using this period is to avoid the period of monetary instability present during the 1970s and early 1980s where monetary policy of the Bank of Spain focused on the strict control of monetary aggregates. Starting with the mid-1980s the growing financial opening of the Spanish economy, with its membership in the EMS, and especially the liberalization process of the Spanish financial system created important changes in the strategy followed by the Bank of Spain, resulting in the growing importance of interest rates in the execution of monetary policy. The year 1988 was chosen as the beginning date for this second period, thus avoiding the important variability experienced in interest rates during 1987 (for further details, see Bank of Spain, 1997, esp. pp. 89–119).

8. By acting this way, the authors assumed that unexpected monetary policy actions do not have an instantaneous impact on output (IPI) and prices (CPI).

9. Data restrictions limit the estimates for the industrial activity branches to the period 1991–98.

10. This parameter was calculated as the result of multiplying, for each region, the estimated sensitivity from the RF-shock (Table 3) for each of the industrial subsections by its respective participation in the regional industrial gross domestic product in 1998.

11. The values of both parameters are shown Appendix Table A1.