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Do ECB's Monetary Policies Benefit EMEs? A GVAR Analysis on the Global Financial and Sovereign Debt Crises and Postcrises Period *
Author(s) -
Colabella Andrea
Publication year - 2021
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12403
Subject(s) - economics , interest rate , spillover effect , monetary economics , shock (circulatory) , shadow (psychology) , monetary policy , exchange rate , international economics , financial integration , macroeconomics , finance , financial market , medicine , psychology , psychotherapist
This paper studies the spillover effects of the ECB's monetary policies on non‐euro area countries, using a GVAR methodology, shadow rate for advanced economies (Wu and Xia, 2016) and shock identification through Cholesky decomposition. A euro‐area shadow interest rate hike triggers a broad‐based decline in output abroad, especially in Central, Eastern and South‐Eastern European (CESEE) economies, and a less widespread increase in short‐term interest rates. How countries respond to the shock depends on their characteristics: the spillover effects are transmitted mainly through the trade channel, while the short‐term interest rate channel plays a limited role. Results are robust to different model specifications.