Spill-over effects of monetary policy

Autori

• Michael Flad

Parametri

• Economia e affari
• Discussion paper / Deutsche Bundesbank ; Eurosystem : Ser. 1, Economic studies

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This study examines differences in the interest rate response to an ECB policy impulse in the euro area, the new EU-member states, and in the other non-euro zone EU countries in order togauge the degree of interest rate alignment in Europe. To this end, PANIC, a Panel Analysis of Non-stationarity in I diosyncratic and Common components, is employed in a structural factor set-up. Under the assumption that the ECB sets the short end of the yield curve, the analysis shows that: (i) The response of Europe's money and government bond marketsto new information can be summarized by two common stochastic trends and one stationary common factor, which together explain more than 68% of the overall variation of the two market segments; (ii) one of the factor innovations can be associated with the ECB's policy stance,which strongly affects the short end of the euro area's yield curve; (iii) compared to the euro area, the short-term market segments in the new EU-member states react, on average, 12%more weakly to the monetary policy signal, whereas these countries' long-term government bond yields respond up to 25% more strongly to such a common innovation.

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Lingua: Inglese

Pubblicato: 2007