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Monetary Conditions Index: New Empirical Evidence from Central and Eastern European Countries

In: Ekonomický časopis/Journal of Economics, vol. 66, no. 2
Anca Elena Nucu - Sorin Gabriel Anton

Details:

Year, pages: 2018, 139 - 158
Keywords:
Monetary Conditions Index, Central and Eastern Europe, monetary policy, principal components, Vector Error Correction Model, interest rate, real exchange rate JEL Classification: E52, E44, E17
Article type: Vedecký / Article
About article:
The aim of the paper is to build a Monetary Conditions Index (MCI) for four Central and Eastern European (CEE) countries by combining changes in the short-term interest rate and in the real effective exchange rate over the period August 2005 – December 2015. Contrary to previous papers, we employ a Vec¬tor Error Correction Model to assess the relative importance of real interest rate and real exchange rate for the monetary conditions in several CEE countries. The results of the analysis provide new empirical evidence on the MCI’s ability to capture the monetary policy developments. Furthermore, we employ Granger causality to infer the extent of external influences on the overall monetary conditions of analysed countries. The results highlight that monetary decisions in the Eurozone have a prominent influence on monetary conditions in CEE countries.
The aim of the paper is to build a Monetary Conditions Index (MCI) for four Central and Eastern European (CEE) countries by combining changes in the short-term interest rate and in the real effective exchange rate over the period August 2005 – December 2015. Contrary to previous papers, we employ a Vec¬tor Error Correction Model to assess the relative importance of real interest rate and real exchange rate for the monetary conditions in several CEE countries. The results of the analysis provide new empirical evidence on the MCI’s ability to capture the monetary policy developments. Furthermore, we employ Granger causality to infer the extent of external influences on the overall monetary conditions of analysed countries. The results highlight that monetary decisions in the Eurozone have a prominent influence on monetary conditions in CEE countries.
How to cite:
ISO 690:
Nucu, A., Anton, S. 2018. Monetary Conditions Index: New Empirical Evidence from Central and Eastern European Countries. In Ekonomický časopis/Journal of Economics, vol. 66, no.2, pp. 139-158. 0013-3035.

APA:
Nucu, A., Anton, S. (2018). Monetary Conditions Index: New Empirical Evidence from Central and Eastern European Countries. Ekonomický časopis/Journal of Economics, 66(2), 139-158. 0013-3035.