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Transmission Of German Monetary Policy In The Pre-Euro Period

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  • LÜTKEPOHL, HELMUT
  • WOLTERS, JÜRGEN

Abstract

A small macroeconomic model is constructed to study the transmission of the monetary policy conducted by the Deutsche Bundesbank (DBB) since the middle of the 1970s. For this purpose, quarterly, seasonally unadjusted data for the period from 1975 to 1998 are used; that is, the period until the introduction of the Euro is considered. A vector error correction model is constructed for the German monetary sector based on M3, GNP, an inflation rate, a long-term interest rate, and a short-term rate that represents the policy variable of the DBB. Moreover, import price inflation is included as an exogenous variable to capture foreign effects. An impulse response analysis highlights the effects of changes in the short-term interest rate and shows the interaction of the main variables of the monetary sector.We thank Alexander Benkwitz for helping with the computations and Massimiliano Marcellino, Paulo Rodrigues, Phillipe Andrade, Harald Uhlig, Adrian Pagan, and two anonymous referees for comments. Financial support was provided by the Deutsche Forschungsgemeinschaft, Sonderforschungsbereich 373, and the European Commission under the Training and Mobility of Researchers Programme (contract No. ERBFMRXCT980213). The paper was presented at the EEA meeting and the ESEM in Venice in 2002.

Suggested Citation

  • Lütkepohl, Helmut & Wolters, Jürgen, 2003. "Transmission Of German Monetary Policy In The Pre-Euro Period," Macroeconomic Dynamics, Cambridge University Press, vol. 7(5), pages 711-733, November.
    • Handle: RePEc:cup:macdyn:v:7:y:2003:i:05:p:711-733_02
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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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