Skip to main content

Research Repository

Advanced Search

Cross-country asymmetries in monetary policy transmission: Evidence from EMU members

Altavilla, Carlo; Landolfo, Luigi


Carlo Altavilla

Luigi Landolfo


This paper analyzes monetary policy asymmetries in EMU participating countries. In particular, we use a structural dynamic modelling approach to investigate asymmetric monetary transmission in Europe. Asymmetries are investigated in two different ways. First, we restrict the estimated structural models reflecting the monetary constraints each country faced during the EMS period. We obtain well-behaved and comparable effects of monetary policy shocks. Second, efficiency frontiers for the selected EMU countries are estimated. In computing the optimal combinations of output gap and inflation volatility we use a weighted average of interest rate and exchange rate, i.e. the Monetary Condition Index (MCI), as a policy instrument. The impulse response analysis implemented with the MCI shows relatively small differences in the responses of the real economy to monetary policy shocks. Altogether the results suggest that, no matter which policy instrument is used, output gap and inflation respond to identical monetary shocks with a similar speed and movement, albeit with a different degree of effect. © 2005 Taylor & Francis Ltd.

Journal Article Type Article
Publication Date Jan 1, 2005
Journal International Review of Applied Economics
Print ISSN 0269-2171
Publisher Taylor & Francis (Routledge)
Peer Reviewed Peer Reviewed
Volume 19
Issue 1
Pages 87-106
Keywords monetary transmission mechanism, asymmetries, MCI
Public URL
Publisher URL

Downloadable Citations