Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Notes on the contributors
- Acknowledgments
- Introduction
- 1 New Member States: macroeconomic outlook and forecasts
- 2 The asymmetric impact of enlargement on old and new Member States: a general equilibrium approach
- 3 Changes in the spatial distribution patterns of European regional activity: the enlargements of the mid-1980s and 2004
- 4 Forecasting macroeconomic variables for the new Member States
- 5 The cyclical experience of the new Member States
- 6 Demand and supply shocks in the new Member States
- 7 Monetary transmission in the new Member States
- 8 Promoting fiscal restraint in three Central European Member States
- 9 Current account dynamics in the new Member States
- 10 Challenges to banking sector stability in selected new Member States
- 11 Infrastructure investments as a tool for regional development policy: lessons from the Spanish evidence
- 12 TFP, costs and public infrastructure: an equivocal relationship
- 13 Regional policies after the EU enlargement
- Index
- References
7 - Monetary transmission in the new Member States
Published online by Cambridge University Press: 22 September 2009
Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Notes on the contributors
- Acknowledgments
- Introduction
- 1 New Member States: macroeconomic outlook and forecasts
- 2 The asymmetric impact of enlargement on old and new Member States: a general equilibrium approach
- 3 Changes in the spatial distribution patterns of European regional activity: the enlargements of the mid-1980s and 2004
- 4 Forecasting macroeconomic variables for the new Member States
- 5 The cyclical experience of the new Member States
- 6 Demand and supply shocks in the new Member States
- 7 Monetary transmission in the new Member States
- 8 Promoting fiscal restraint in three Central European Member States
- 9 Current account dynamics in the new Member States
- 10 Challenges to banking sector stability in selected new Member States
- 11 Infrastructure investments as a tool for regional development policy: lessons from the Spanish evidence
- 12 TFP, costs and public infrastructure: an equivocal relationship
- 13 Regional policies after the EU enlargement
- Index
- References
Summary
Introduction
The analysis of the monetary transmission mechanism aims to describe the channels through which monetary policy decisions are transmitted to the economy and affect policy objectives. Knowledge of the monetary transmission mechanism underpins the effective conduct of monetary policy; it allows not only selection of an adequate set of policy instruments, but also their implementation in a timely way.
There is a broad range of empirical evidence on the effects and the transmission of monetary policy for the United States, the Euro area and for most EU countries (see Ganev et al., 2002; Ehrmann et al., 2003; or Goodhart, 2003) using three different, well-defined methodologies:
First, the approach known as the ‘narrative method’. Following Ganev et al. (2002), this method consists of identifying policy shocks, developing a counterfactual (i.e. what would have happened to the outcome variables in the absence of the shock) comparing the actual with the counterfactual, and then drawing conclusions.
Secondly, the use of structural VAR models or small- (or large-) scale macroeconomic models to analyse and quantify the existence of different effects of monetary policy on output and prices. The comparison of the responses to a monetary shock with those obtained for other countries may shed light on the existence of different transmission channels.
Last, the use of micro data in order to analyse how the effects of the monetary policy arise. Asymmetries in the transmission of monetary policy are usually related to the characteristics of the mechanisms through which monetary policy influences the real economy and how agents (financial and non-financial firms, households etc.) behave.
- Type
- Chapter
- Information
- Publisher: Cambridge University PressPrint publication year: 2006
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