Mirdala, Rajmund (2014): Interest Rates and Structural Shocks in European Transition Economies. Published in: Business and Economic Horizons , Vol. 10, No. 4 (December 2014): pp. 305-319.
Preview |
PDF
MPRA_paper_62031.pdf Download (196kB) | Preview |
Abstract
European transition economies are still suffering from negative implications of economic crisis. Significant decrease in the key interest rates was followed by reduced maneuverability of central banks in providing incentives into real economies. Low interest rate environment together with effects of quantitative easing induced economists to examine sources of interest rates volatility. Responsiveness of short-term interest rates to the structural shocks provides unique platform to investigate sources of their unexpected volatility and associated effects on monetary policy decision making. Moreover, sources of interest rates volatility may help to reveal side effects of the exchange rate regime choice. Empirical investigation of interest rates determination under different exchange rate regimes highlights substantial implications of relative exchange rate diversity and its importance during the crisis period. In the paper we analyze sources of the short-term nominal interest rates volatility in ten European transition economies by employing SVAR methodology. We observed unique patterns of the short-term interest rates responsiveness in countries with different exchange rate arrangements that contributes to the fixed versus flexible exchange rate dilemma.
Item Type: | MPRA Paper |
---|---|
Original Title: | Interest Rates and Structural Shocks in European Transition Economies |
Language: | English |
Keywords: | interest rates, structural shocks, exchange rate arrangements, economic crisis, VAR, impulse-response function |
Subjects: | C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics |
Item ID: | 62031 |
Depositing User: | Rajmund Mirdala |
Date Deposited: | 11 Feb 2015 14:29 |
Last Modified: | 10 Oct 2019 12:38 |
References: | BRATU, M. (2011) Modeling and Forecasting the Exchange Rate in Romania, Romanian Journal of Economics, Institutul de Economie Naţională al Academiei Române, 33(2): 56-72 CALVO, G., REINHART, C. (2002) Fear of Floating, Quarterly Journal of Economics 117(2): 379-408 DABALE, W.P., JAGERO, N. (2013) Causes of Interest Rate Volatility and its Economic Implications in Nigeria, International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(4): 27-32. DAMIAN, M. (2011) The Comparative Analysis of the Monetary Policy Strategies before the Adoption of the Euro Currency and the Impact upon the Maastricht Criteria, Journal of Applied Economic Sciences, 6(3): 222-229 EIJFFINGER, S., SCHALING, E., VERHAGEN, W. (2000) The Term Structure of Interest Rates and Inflation Forecast Targeting, [CEPR, Discussion Paper 2375], London, CEPR, 23 p. EMIRIS, M. (2006) The Term Structure of Interest Rates in a DSGE Model, [National Bank of Belgium, Working Paper Research No. 88] Brussels, National Bank of Belgium, 55 p. FENDEL, R. (2009) Note on Taylor Rules and the Term Structure, Applied Economics Letters, 16(11): 1097-1101 GERLACH-KRISTEN, P., RUDOLF, B. (2010) Macroeconomic and Interest Rate Volatility under Alternative Monetary Operating Procedures, [Swiss National Bank, Working Paper No. 2010-12] Zurich, Swiss National Bank, 40 p. KULISH, M. (2007) Should Monetary Policy Use Long-term Rates? B.E. Journal of Macroeconomics, 7(1): 1-26. MCGOUGH, B., RUDEBUSCH, G., WILLIAMS, J.C. (2005) Using a Long-term Interest Rates as the Monetary Policy Instrument, Journal of Monetary Economics 52(5): 855-879. OBSTFELD, M. (1985) Floating Exchange Rates: Experience and Prospects, Brookings Papers on Economic Activity, 1985(2): 369-450. RUDEBUSCH, G.D., SACK, B.P., SWANSON, E.T. (2006) Macroeconomic implications of changes in the term premium, [Federal Reserve Bank of San Francisco, Working Paper No.46/2006], San Francisco, Federal Reserve Bank of San Francisco, 48 p. STAVAREK, R. (2012) Exchange Market Pressure in Central European Countries from the Eurozone Membership Perspective, South East European Journal of Economics and Business, 3(2): 7-18. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/62031 |