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CNB > Economic research > Research publications > CNB Working paper series > 2018 > Spillovers from Euro Area Monetary Policy: A Focus on Emerging Europe

Spillovers from Euro Area Monetary Policy: A Focus on Emerging Europe

Soňa Benecká, Ludmila Fadejeva, Martin Feldkircher

This paper investigates the international effects of a euro area monetary policy shock, focusing on countries from Central, Eastern, and Southeastern Europe (CESEE). To that end, we use a global vector autoregressive (GVAR) model and employ shadow rates as a proxy for the monetary policy stance during normal and zero-lower-bound periods. We propose a new way of modeling euro area countries in a multi-country framework, accounting for joint monetary policy, and a novel approach to simultaneously identifying shocks. Our results show that in most euro area and CESEE countries, prices adjust and output falls in response to a euro area monetary tightening,
but with a substantial degree of heterogeneity.

JEL codes: C32, E32, F44, O54

Keywords: Euro area monetary policy, global vector autoregression, spillovers

Issued: May 2018

Download: CNB WP No. 2/2018 (pdf, 906 kB)