The effects of negative interest rates on the monetary transmission mechanism – The case of Switzerland

Monetary transmission mechanism is the mechanism which shows in what ways and what extent interaction between the real economy-monetary policy, impacts aggregate demand and production. While transmission channels or mechanisms traditionally classified they divided into three categories; interest rates, Exchange rates and other asset prices.In this study to test the existence of the European debt crisis by the monetary transmission mechanism, 15 members of European Union country by using annual (2002-2014) data set were included into study. We use panel unit root tests to analyze whether the variables in the model are stationary or not. For the countries included in the study, panel causality tests developed by Granger is applied. Panel Vector Autoregressive Model has been estimated and results of Impulse-Response Analysis and Variance Decomposition have been interpreted.

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CHARACTERIZING THE MONETARY TRANSMISSION MECHANISM IN A SMALL OPEN ECONOMY: THE CASE OF MALAYSIA

The Singapore Economic Review ◽

10.1142/s0217590803000670 ◽

2003 ◽

Vol 48 (02) ◽

pp. 113-134 ◽

Cited By ~ 4

Author(s):

WEE BENG GAN ◽

LEE YING SOON

Keyword(s):

Exchange Rate ◽

Central Bank ◽

Interest Rates ◽

Open Economy ◽

Small Open Economy ◽

Policy Instrument ◽

Transmission Mechanism ◽

Monetary Transmission ◽

Impulse Response Functions ◽

Monetary Transmission Mechanism

This paper evaluates the monetary policy response of Malaysia's central bank and the nature of monetary transmission mechanism in the 1990s when the exchange rate was on a managed float and the capital account was open. Structural vector autogression analysis is employed to evaluate how the central bank sets short term interest rates taking into consideration the constraints faced in adjusting the policy instrument to shocks to the economy. The impulse response functions and the variance decomposition indicate that the central bank preferred to use foreign exchange intervention rather than interest rate to stabilize the ringgit exchange rate. The results suggest that a sustained high level of interest rates would have caused a prolonged and deep contraction in output during the East Asian financial crisis.

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The Monetary Transmission Mechanism in the New Economy: Evidence from Turkey (1997-2006)

South East European Journal of Economics and Business ◽

10.2478/v10033-007-0011-3 ◽

2007 ◽

Vol 2 (1) ◽

pp. 15-24 ◽

Cited By ~ 9

Author(s):

Atilla Cifter ◽

Alper Ozun

Keyword(s):

Interest Rates ◽

Money Supply ◽

New Economy ◽

Transmission Mechanism ◽

New Keynesian ◽

Monetary Transmission ◽

Causality Test ◽

Monetary Transmission Mechanism ◽

New Period ◽

The New Period

The Monetary Transmission Mechanism in the New Economy: Evidence from Turkey (1997-2006)This study aimed to test the money base, money supply, credit capacity, industrial production index, interest rates, inflation and real exchange rate data of Turkey during the years 1997 - 2006. These were tested through the monetary transmission mechanism and passive money hypothesis, using the vector error correction model-based causality test. Empirical findings showed that the passive money supply hypothesis of the new Keynesian economy is supported in part by accommodationalist views and differs from those of structuralist and liquidity preference theories. However, the monetary transmission mechanism has established that long-term money supply only affects general price levels, while production is influenced by interest rates in the new period of the Turkish economy. Empirical findings show that in this new period, interest transmission mechanisms are at the forefront.

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The Monetary Transmission Mechanism: An Empirical Framework

The Journal of Economic Perspectives ◽

10.1257/jep.9.4.11 ◽

1995 ◽

Vol 9 (4) ◽

pp. 11-26 ◽

Cited By ~ 176

Author(s):

John B Taylor

Keyword(s):

Interest Rates ◽

Rational Expectations ◽

Transmission Mechanism ◽

Monetary Transmission ◽

Market Prices ◽

Policy Rules ◽

Monetary Transmission Mechanism ◽

Real Gdp ◽

The Impact

This paper provides an overview of the monetary transmission mechanism describing the impact of changes in monetary policy on real GDP. Changes in financial market prices--including long-term interest rates and exchange rates--are the main vehicle for the transmission of policy. The framework incorporates rational expectations and policy rules. It is empirical and appears to fit the facts well.

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The Effects of Euro Area Interest Rate Changes: Evidence from Macroeconomic Models

National Institute Economic Review ◽

10.1177/00279501041871008 ◽

2004 ◽

Vol 187 ◽

pp. 93-103 ◽

Cited By ~ 1

Author(s):

Peter McAdam ◽

Julian Morgan

Keyword(s):

Monetary Policy ◽

Interest Rate ◽

Interest Rates ◽

Euro Area ◽

Transmission Mechanism ◽

Monetary Transmission ◽

Macroeconomic Models ◽

Monetary Transmission Mechanism ◽

European Central ◽

Investment Response

This paper examines the effects of changes in Euro Area interest rates using macroeconomic models. It examines the results of a harmonised monetary policy simulation at the Euro Area level using the National Institute of Economic and Social Research's Global Economic Model (NiGEM) and the European Central Bank's Area Wide Model (AWM). Comparison is also drawn with the aggregate results from Euro Area National Central Bank models as reported in van Els et al. (2001). Overall, the results across the different models are broadly consistent with what might be regarded as the stylised facts of the monetary transmission mechanism. That is to say that, following a policy tightening, there is an initial fall in output consisting of a more pronounced investment response and a less pronounced consumption response. This output fall is accompanied by protracted price dynamics.

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