The monetary transmission in the euro area: post-1999 data assessment

Abstract

This article investigates the transmission of monetary policy shocks in the euro area after 1999. To examine this we use empirical structural vector error correction models, built on the data for the period from 1999 to mid-2005. We identify a monetary shock by restricting it to have only temporary effects on output and inflation. We obtain negative responses of inflation and output to a restrictive monetary shock in the period under investigation. These results are obtained with the HICP based as well as the core inflation measure included in the model.

Acknowledgements

I thank Helmut Lütkepohl, Mike Artis, Anindya Banerjee, Pedro Cerqueira, Andrea Barone, Michael Ehrmann, Vilen Lipatov and Caterina Mendicino for their useful suggestions.

Notes

¹Sometimes also HICPXENE.