@article{jfe2019732,
author={Anaraki, Nahid Kalbasi},
title={Monetary Transmission Mechanism: Empirical Evidence from Eurozone},
journal={Journal of Finance and Economics},
volume={7},
number={3},
pages={88--92},
year={2019},
url={http://pubs.sciepub.com/jfe/7/3/2},
issn={2328-7276},
abstract={This paper examines the effectiveness and extent of monetary transmission mechanism from Federal Funds Rate (FFR) to London Interbank Offered Rate (LIBOR). The paper employs a co-integration technique, Granger causality test, and vector Error Correction (VEC) model to examine the direction of causality and the extent and size of the pass-through effect from FFR to LIBOR. The study considers two sub-periods: the first period spans 1994:02-2008:12, and the second period covers 2009:01-2019:01, recognized as a period of implementing unconventional monetary policy to find out if there is any difference between the size of the pass-through effect during the conventional and unconventional monetary policy. Finally, the study uses a structural VAR model to measure the impact of a shock to FFR on the Eurozone economic growth. The estimated results indicate a significant co-integration relationship between FFR and LIBOR for both sub-periods and the causality runs from FFR to LIBOR in both periods. However, the pass through effect is statistically stronger in the second sub-period during unconventional monetary policy. In addition, the results suggest that a shock to FFR has a significant impact on the level of economic growth in Eurozone. This result has important policy implications for monetary authorities in the Eurozone as they can offset the effects of a shock to FFR by using the appropriate monetary policy.},
doi={10.12691/jfe-7-3-2}
publisher={Science and Education Publishing}
}