Transmission of Global Financial Shocks to EMU Member States: The Role of Monetary Policy and National Factors

37 Pages Posted: 11 Jul 2016

See all articles by Maria Gelman

Maria Gelman

University of Kiel

Axel Jochem

Deutsche Bundesbank

Stefan Reitz

University of Kiel

Date Written: 2016

Abstract

The paper analyses the transmission of global financial shocks to individual member states of the European Monetary Union (EMU), in which monetary policy is delegated to the ECB and financial markets are fully integrated. Using a panel VAR model, we show that the asymmetric effects of global shocks on member states are partly offset by the uniform access of commercial banks to the Eurosystem's open market operations in conjunction with the redistribution of liquidity via the TARGET mechanism. However, an appropriate policy mix of sound public finances, solid financial regulation and targeted macroprudential measures is necessary in order to safeguard macroeconomic sustainability without needing to manage capital flows.

Keywords: monetary union, capital flows, global financial cycle, macroeconomic imbalances

JEL Classification: F32, F36, F45

Suggested Citation

Gelman, Maria and Jochem, Axel and Reitz, Stefan, Transmission of Global Financial Shocks to EMU Member States: The Role of Monetary Policy and National Factors (2016). Bundesbank Discussion Paper No. 23/2016, Available at SSRN: https://ssrn.com/abstract=2807294 or http://dx.doi.org/10.2139/ssrn.2807294

Maria Gelman (Contact Author)

University of Kiel

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Axel Jochem

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Stefan Reitz

University of Kiel

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
77
Abstract Views
736
Rank
563,377
PlumX Metrics