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Aspects of the Monetary Transmission Mechanism Under Exchange Rate Targeting: The Case of France
Author:
Mr. Joaquim Vieira Ferreira Levy
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and
Mr. Ioannis Halikias
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Series:
IMF Working Papers
Volume/Issue:
Volume 1997: Issue 044
Language:
English
Publication Date:
01 Apr 1997
DOI:
https://doi.org/10.5089/9781451974751.001
ISBN:
9781451974751
ISSN:
1018-5941
Pages:
38
Keywords:
WP; transmission mechanism; rate; interest rate differential; DM; Monetary Policy Transmission; EMU; differentials vis-à-vis; anchor currency interest rate; VAR model; deutsche mark; interest rate change; VAR methodology; interest rate increase; Short term interest rates; Monetary transmission mechanism; Vector autoregression; Credit; Exchange rates
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper examines monetary transmission in France using the vector autoregression methodology. Interest rates are decomposed into external and domestic components, and a nonrecursive contemporaneous structure is used to identify the system. Innovations in the external component are found to have a significant impact on economic activity, while innovations in the domestic premium have a statistically negligible effect, suggesting that interest rate hikes in defense of the franc may have had a smaller impact on the economy than usually thought. The paper also discusses some implications of Economic and Monetary Union and provides evidence concerning the importance of the credit channel in France.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund