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One money, many markets: a factor model approach to monetary policy in the Euro Area with high-frequency identification

Corsetti, Giancarlo and Duarte, Joao B. and Mann, Samuel (2018) One money, many markets: a factor model approach to monetary policy in the Euro Area with high-frequency identification. CFM Discussion Paper Series, CFM-DP2018-05. Centre For Macroeconomics, London, UK.

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Abstract

We reconsider the effects of common monetary policy shocks across countries in the euro area, using a data-rich factor model and identifying shocks with high-frequency surprises around policy announcements. We show that the degree of heterogeneity in the response to shocks, while being low in financial variables and output, is significant in consumption, consumer prices and macro variables related to the labour and housing markets. Mirroring country-specific institutional and market differences, we find that home ownership rates are significantly correlated with the strength of the housing channel in monetary policy transmission. We document a high dispersion in the response to shocks of house prices and rents and show that, similar to responses in the US, these variables tend to move in different directions.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.centreformacroeconomics.ac.uk/Discussio...
Additional Information: © 2018 The Authors
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor > HD100 Land Use
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy (Targets, Instruments, and Effects)
Sets: Research centres and groups > Centre for Macroeconomics
Date Deposited: 13 Mar 2018 10:47
Last Modified: 13 Mar 2018 10:47
URI: http://eprints.lse.ac.uk/id/eprint/87182

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