Monetary Policy Transmission Mechanisms within the European Monetary Union

Abstract

The interest in transmission mechanisms has revived since the EMU was established. Within such a heterogeneous framework, in fact, it is fundamental to appraise how the one size fits all monetary policy affects every single member. This paper presents an analysis in this direction through the estimation of a VAR model using nation-wide time series. Furthermore, given that data coverage is now becoming wide enough, it provides a verification of the impulse-response functions structural stability. This paper provides evidence of a structural break for Austria and Germany and of asymmetric effects within the EMU, which are not so big to make the one size fits all monetary policy a challenging task, however.