Monetary Policy Shocks in the new EU members: A VAR approach

Abstract

The paper provides empirical evidence on the effects of monetary policy shocks in the three largest economies among new EU members: Czech Republic, Hungary and Poland. VAR system estimates show that the co-movement of macroeconomic variables, conditional on a monetary policy shock, is similar across these countries and, despite their lower financial development, not dissimilar to what is found for more advanced European economies. While qualitatively similar to the responses observed in the old EU members, the responses of the new members are, on average, weaker. Poland has the most stable responses both over time and across different identification schemes.