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Monetary policy shocks in the euro area and global liquidity spillovers

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Author Info
Joao Sousa (Banco de Portugal, Research Department, Portugal)
Andrea Zaghini (Banca d'Italia, Research Department, Italy)

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Abstract

We analyse the international transmission of monetary shocks with a focus on the effects of foreign liquidity on the euro area. We estimate two domestic structural VAR models for the euro area and then we introduce a global liquidity aggregate. The impulse responses show that a positive shock to foreign liquidity leads to permanent increases in the euro area M3 aggregate and the price level, a temporary rise in real output and a temporary appreciation of the euro real effective exchange rate. Moreover, we find that innovations in global liquidity play an important role in explaining price and output fluctuations. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.320
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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 13 (2008)
Issue (Month): 3 ()
Pages: 205-218
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Handle: RePEc:ijf:ijfiec:v:13:y:2008:i:3:p:205-218

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael Woodford, 2007. "Globalization and Monetary Control," NBER Working Papers 13329, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Ivan Baboucek & Martin Jancar, 2005. "Effects of Macroeconomic Shocks to the Quality of the Aggregate Loan Portfolio," Working Papers 2005/01, Czech National Bank, Research Department. [Downloadable!]
  3. Fabio C. Bagliano & Claudio Morana, 2006. "International Macroeconomic Dynamics: a Factor Vector Autoregressive Approach," ICER Working Papers 41-2006, ICER - International Centre for Economic Research. [Downloadable!]
    Other versions:
  4. Rasmus Rüffer & Livio Stracca, 2006. "What is global excess liquidity, and does it matter?," Working Paper Series 696, European Central Bank. [Downloadable!]
    Other versions:
  5. Michael Woodford, 2007. "Globalization and Monetary Control," NBER Chapters, in: International Dimensions of Monetary Policy National Bureau of Economic Research, Inc. [Downloadable!]
  6. Joao Miguel Sousa & Andrea Zaghini, 2007. "Global Monetary Policy Shocks in the G5: a SVAR Approach," CEIS Research Paper 89, Tor Vergata University, CEIS. [Downloadable!]
    Other versions:
  7. Helge Berger & Thomas Harjes, 2009. "Does Global Liquidity Matter for Monetary Policy in the Euro Area?," IMF Working Papers 09/17, International Monetary Fund. [Downloadable!]
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