The Transmission of Interest Rate hocks to Asia - Are Effects Different below the Zero Lower Bound?
Feldkircher, Martin; Huber, Florian; Chantapacdepong, Pornpinun; Punzi, Maria Teresa | March 2017
Abstract
We use a non-linear factor-augmented vector-autoregressive model to evaluate international effects of an unexpected decrease in euro area policy rates. Given the current environment of ultra low or negative interest rates, we especially focus on potential differences in the transmission of the monetary policy shock depending on the level of interest rates in the country from where the shock originates, i.e., the euro area. A euro area monetary policy shock when euro area interest rates are positive at the time the shock occurs tends to trigger positive spillovers to industrial production, house and stock prices and negative effects on short- and long-term interest rates, as well as on inflation. Results tend to be similar when interest rates are already below zero at the time monetary policy turns out to be expansionary, however responses are estimated with a larger degree of uncertainty. In some cases, a distinct transmission depending on the level of interest rates in the euro area, is observable but no general patterns emerge from the data.
Citation
Feldkircher, Martin; Huber, Florian; Chantapacdepong, Pornpinun; Punzi, Maria Teresa. 2017. The Transmission of Interest Rate hocks to Asia - Are Effects Different below the Zero Lower Bound?. © Asian Development Bank Institute. http://hdl.handle.net/11540/7780.Keywords
International Financial Market
Multilateral Financial Institutions
Economic Recession
Market
Crisis
Economic indicators
Growth models
Gross domestic product
Macroeconomics
Economic forecast
Financial Stability
Financial Management System
Financial Restructuring
Capital Market Development
Market Development
Economics
Erosion
International Economics
Macroeconomic
Macroeconomic Analysis
Performance Evaluation
Impact Evaluation
Foreign and Domestic Financing
Foreign Direct Investment
Business recessions
Multilateral development banks
Regulatory reform
Capital
Exports
Economic development projects
Economic policy
Economic forecasting
Show allCollapse