Monetary Policy in Transition: Structural Econometric Modelling and Policy Simulations
32 Pages Posted: 30 Jul 2009
Date Written: 2002
Abstract
In this paper I estimate a Bayesian structural VAR models for the Czech Republic and Poland, allowing for changes in parameters between the two monetary policy arrangements. The four-variables structural VAR methodology adopted in the study is successful in identifying monetary policy shocks and their effects for the Czech and Polish economies. The time-varying model is capable of detecting a change in the policy reaction function consistent with introduction of the floating exchange rate system and switching to short-term interest rate as the main policy instrument. The results indicate the dominant role of exchange rate in the monetary transmission mechanism.
Keywords: transition, monetary policy, inflation, structural vector autoregression, policy simulations
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