In this dissertation, we are going to investigate the effects of the monetary
policy and monetary policy shocks on several fundamental economic
variables, including the Gross Domestic Product, the Interest Rates and the
Consumer Price Index for 4 European countries
, Cyprus, Greece, Ireland and
Portugal,
that faced the most issues during the recession
which initially
started in 2008/2009 and continues until the time
of writing (October 2016).
This study offers results for the period under which the Euro became the only
currency among the countries of the Euro area.
Our goal is to provide evidence about the monetary policy implicated by the
European Central Bank and
the response of the 4 countries’ major
macroeconomics variables to monetary policy shocks. Using a Vector
Autoregressive model (VAR) for each of the 4 countries, we also try to
estimate the impact of changes of shocks to gross domestic product and
prices,
with the help of impulse responses to each variable mentioned above.
The main findings of our study indicate monetary policy shocks have a very
small effect on both the Gross Domestic Product and the Consumer Price
Index, which is expected, since the Eurozone and the European Central Bank
have imposed a low interest rate policy to keep inflation at very low levels.
Additionally, a monetary policy shock on rates would lead to a small but
steady decline
of the effect on the rates themselves
over the time period.
In this study, we have also investigated
the effects of a shock to the GDP and
the CPI of each country on the rates
, which are interesting
. In all countries, a
shock in the GDP lead to a boom over the period of 2 quarters and then it
remains pretty st
able for the remaining quarters. As far as the shock to CPI is
concerned, in
Ireland and Portugal we depict
an increase at first
quarters
, but
then it starts deteriorating, without dying for the scrutinized period, which is
8
quarters. On the other hand,
f
or both
Greece and Cyprus
, the shocks to CPI
have
less effect on rates.
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