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The Effects of Euro Area Interest Rate Changes: Evidence from Macroeconomic Models

Published online by Cambridge University Press:  26 March 2020

Peter McAdam  and
Julian Morgan
Julian Morgan*
Affiliation:
DG Research, European Central Bank
*
e-mail: Julian.Morgan@ECB.int
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Abstract

This paper examines the effects of changes in Euro Area interest rates using macroeconomic models. It examines the results of a harmonised monetary policy simulation at the Euro Area level using the National Institute of Economic and Social Research's Global Economic Model (NiGEM) and the European Central Bank's Area Wide Model (AWM). Comparison is also drawn with the aggregate results from Euro Area National Central Bank models as reported in van Els et al. (2001). Overall, the results across the different models are broadly consistent with what might be regarded as the stylised facts of the monetary transmission mechanism. That is to say that, following a policy tightening, there is an initial fall in output consisting of a more pronounced investment response and a less pronounced consumption response. This output fall is accompanied by protracted price dynamics.

Type
Articles
Information
National Institute Economic Review , Volume 187 , January 2004 , pp. 93 - 103
Copyright
Copyright © 2004 National Institute of Economic and Social Research

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Footnotes

Correspondence should be addressed to Julian Morgan. We thank, without implicating, Alistair Dieppe, Gabriel Fagan, Jérôme Henry, Ian Hurst, Benoít Mojon, Ray Barrell, Ricardo Mestre, Carlos Robalo-Marqués, Christopher Sims and Martin Weale for helpful comments and suggestions. The opinions expressed are not necessarily those of the ECB.

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