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The transmission of monetary shocks in the euro area: a V AR analysis based on euro-wide data
2000
PSL Quarterly Review
Using area-wide data, we simulate the responses of inflation and real output following monetary shocks in the EMU. We find that short-term interest rate shocks have a significant impact on real activity, but hardly on prices. M3 shows a perverse short-term response to a monetary contraction, which should be taken into account when interpreting the reference value of money growth (the "first pillar" of the Eurosystem's monetary strategy). Shocks to the effective exchange rate have a rapid impact
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