Impact of monetary policy and VAR applications in a regional context (355)

Theme Track: Methods of Spatial Analysis - Monetary Policy and Spatial VAR Analysis

Author:
Provenzano, Vincenzo

The vector autoregression (VAR) is used for analyzing the dynamic impact of random disturbances on the system of variables. An interesting application is the evaluation of the transmission mechanism at the regional level. In particular, the evaluation of regional asymmetric shock is an important issue for all conceptual and empirical effects.

Aim of this paper is to analyze the transmission mechanism of monetary policy at the regional level. In the last years, several studies has been developed to demonstrate the importance of interest rate channel, banking channel of monetary policy. Empirical work is largely related to the US regions and states and several papers are well suited for that economy. On the other hand, the new European monetary regime underlines the importance of regional effects of a unified monetary policy led by the European Central Bank. According to a credit channel approach, the proposed paper investigates some methodological aspects related to VAR techniques applied in a regional setting, such as borrowing capacity and industry heterogeneity.

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