Do ECB's Monetary Policies Benefit EMEs? A GVAR Analysis on the Global Financial and Sovereign Debt Crises and Postcrises Period *

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.