The Effects of the Euro Area Entrance on the Monetary Transmission Mechanism in Slovakia in Light of the Global Economic Recession
Year: 2015 Volume: 65 Issue: 1 Pages: 55-83
Abstract: In this paper we estimate the monetary policy reaction function of the National Bank of Slovakia and the possible impact of an independent monetary policy on the Slovak economy in 2009 and 2010, when the global economic recession had the strongest impact on Slovakia. We estimate a small macroeconomic VEC model using a modified version of a Bayesian estimation technique developed for models using data observed with different frequencies with core inflation, the exchange rate, the real growth rate of GDP, the balance of trade and the interbank interest rate as endogenous domestic variables. Based on counterfactual simulations, we show that while an independent monetary policy would not be able to mitigate the drop in GDP in the first half of 2009, the recovery phase would have been positively affected.
JEL classification: E52, E58, C11, C53
Keywords: monetary policy, transmission mechanism, Bayesian VEC models, mixed frequency data
RePEc: http://ideas.repec.org/a/fau/fauart/v65y2015i1p55-83.html
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