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The transmission of euro area monetary policy to financially euroised countries

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  • Moder, Isabella

Abstract

This paper provides a comprehensive analysis of the interest rate pass-through of euro area monetary policy to retail rates outside the euro area, contributing to the literature on the consequences of unofficial financial euroisation and on the transmission channels of monetary policy spillovers. The results suggest that in the long run, more than one third of all euro retail rates in euroised countries of central, eastern and south-eastern Europe (CESEE) are linked to the euro area shadow rate. Compared to euro area monetary policy, the share of cointegration of the domestic monetary policy rate is lower, suggesting that domestic central banks in euroised countries with independent monetary policy can only partially control the `euro part´ of the interest rate channel. Furthermore, euro area monetary policy shocks are fast and persistently transmitted into euro retail rates outside the euro area, which constitutes an additional channel of international shock transmission. JEL Classification: C22, C32, E43, E52, F42

Suggested Citation

  • Moder, Isabella, 2021. "The transmission of euro area monetary policy to financially euroised countries," Working Paper Series 2611, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20212611
    Note: 2769592
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    References listed on IDEAS

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    Cited by:

    1. Robert Ferstl & Bernhard Graf & Claudia Kwapil, 2024. "The pass-through of policy interest rates to bank retail rates in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q4/23, pages 41-59.
    2. Magdalena Grothe, 2023. "Monetary Policy Spillovers to Polish Financial Markets," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 2, pages 1-10.

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    More about this item

    Keywords

    EU integration; international monetary policy spillovers; monetary policy transmission; unofficial financial euroisation;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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