The Transmission of Monetary Policy in the Euro Area: Are the Effects Different Across Countries?*
| Author | Gert Peersman |
| Published date | 01 July 2004 |
| Date | 01 July 2004 |
| DOI | http://doi.org/10.1111/j.1468-0084.2004.00080.x |
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The Transmission of Monetary Policy
in the Euro Area: Are the Effects Different
Across Countries?*
Gert Peersman
Department of Financial Economics, Ghent University, Gent, Belgium
(e-mail: gert.peersman@ugent.be)
Abstract
This paper analyses whether the effects of the monetary policy of the
European Central Bank (ECB) may be different across Euro area countries.
First, the limitations in the current empirical literature are highlighted. The
paper then suggests how to deal with these limitations and provides new
empirical evidence on the effects of a common monetary policy shock across
individual member countries. Surprisingly, very similar output effects are
found across countries.
I. Introduction
The Eurosystem has faced and continues to face important challenges since
the euro was introduced on 1 January 1999. The main task of the European
System of Central Banks (ESCB) is to conduct monetary policy for the Euro
area. There remains, however, considerable uncertainty regarding the impact
and timing of a monetary policy shift on the final objectives. To be successful
in conducting monetary policy, the monetary authorities must have an accurate
assessment of the effects of their policy on the economy. This requires a good
understanding of the transmission mechanism through which monetary policy
*I thank Annick Bruggeman, Paul De Grauwe, Peter Hayes, Bernd Hayo, Freddy Heylen, Rudi
Vander Vennet, Frank Smets, Jan Smets, the editor Jonathan Temple, two anonymous referees and
participants at the Antwerp conference on EMU and at seminars at Ghent University and Bank of
England for many useful comments. The first draft was part of my PhD dissertation.
JEL Classification numbers: E4, E5.
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 66, 3 (2004) 0305-9049
285
Blackwell Publishing Ltd, 2004. Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK
and 350 Main Street, Malden, MA 02148, USA.
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