Monetary transmission in Spain: a structural cointegrated VAR approach

Mariam Camarero, Javier Ordóñez, Cecilio Tamarit

Research output: Contribution to journalArticle

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Abstract

This paper analyses the monetary policy channels in Spain using a cointegrated structural VAR approach which explicitly accounts for endogenous policy reactions in a small open economy. Evidence is found of one cointegrating relation which is identified as a long-run money demand function. In addition, stability tests are applied to this relationship to assess whether there has been a change of monetary regime. The impulse-responses for the non-monetary shocks as well as the absence of the puzzles traditionally found in the empirical literature, suggest that the model specification identifies the monetary policy shocks correctly. Thus, according to our results, a monetary contraction causes a weak downward response in the price level, as well as an increase in both short and long-run nominal interest rates, a decrease in aggregate output and an exchange rate appreciation.
LanguageEnglish
Pages2201-2212
Number of pages12
JournalApplied Economics
Volume34
Issue number17
DOIs
StatusPublished - 2002

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Monetary transmission
Spain
Short-run
Stability test
Nominal interest rate
Structural VAR
Demand function
Monetary regimes
Endogenous policy
Price level
Monetary policy shocks
Exchange rates
Model specification
Impulse response
Money demand
Contraction
Aggregate output
Small open economy
Monetary policy

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Monetary transmission in Spain: a structural cointegrated VAR approach. / Camarero, Mariam; Ordóñez, Javier; Tamarit, Cecilio.

In: Applied Economics, Vol. 34, No. 17, 2002, p. 2201-2212.

Research output: Contribution to journalArticle

Camarero, M, Ordóñez, J & Tamarit, C 2002, 'Monetary transmission in Spain: a structural cointegrated VAR approach' Applied Economics, vol. 34, no. 17, pp. 2201-2212. DOI: 10.1080/00036840210138419
Camarero M, Ordóñez J, Tamarit C. Monetary transmission in Spain: a structural cointegrated VAR approach. Applied Economics. 2002;34(17):2201-2212. Available from, DOI: 10.1080/00036840210138419
Camarero, Mariam ; Ordóñez, Javier ; Tamarit, Cecilio. / Monetary transmission in Spain: a structural cointegrated VAR approach. In: Applied Economics. 2002 ; Vol. 34, No. 17. pp. 2201-2212
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