International monetary transmission to the Euro area: Evidence from the U.S., Japan and China

There are marked differences in the effect of increases in monetary aggregates ‎in China, Japan ‎and the U.S. on Euro area economic and financial variables over 1999-2012. Increases in ‎monetary aggregates ‎in China are associated with significant increases in the world price of ‎commodities and with increases in Euro area inflation, industrial production and exports. ‎Results are consistent with shocks to China’s M2 facilitating domestic growth with ‎expansionary consequences for the Euro area economy. In contrast, increases in monetary ‎aggregates in Japan are associated with significant appreciation of the Euro and decreases in ‎Euro area industrial production and exports. Production of goods highly competitive with ‎European goods in Japan and expenditure switching in Japan are consistent with the results. ‎U.S. monetary expansion has relatively small effects on the Euro area over this period ‎compared to results reported in the literature for earlier sample periods.‎