, Volume 40, Issue 2, pp 363–390 | Cite as

Monetary transmission in three central European economies: evidence from time-varying coefficient vector autoregressions

  • Zsolt Darvas
Original Paper


We study the transmission of monetary policy to macroeconomic variables with structural time-varying coefficient vector autoregressions in the Czech Republic, Hungary and Poland, in comparison with that in the euro area. These three countries have experienced changes in monetary policy regimes and went through substantial structural changes, which call for the use of a time-varying parameter analysis. Our results indicate that the impact on output of a monetary shock changed over time. At the point of the last observation of our sample, the fourth quarter of 2011, among the three countries, monetary policy was most powerful in Poland and not much less strong than the transmission in the euro area. We discuss various factors that can contribute to differences in monetary transmission, such as financial structure, labour market rigidities, industry composition, exchange rate regime, credibility of monetary policy and trade openness.


Monetary transmission Time-varying coefficient vector autoregressions Kalman-filter 

JEL Classification

C32 E50 



I am thankful to Fabio Canova, Peter van Els, Leo de Haan, Benoît Mojon, András Simon, Peter Vlaar, three anonymous referees, seminar participants at De Nederlandsche Bank, Magyar Nemzeti Bank and Oesterreichische Nationalbank, and conference participants at the Annual Congress of the European Economic Association and at the ECOMOD for comments and suggestions on earlier versions of this article. Part of this research was conducted while I was a visiting scholar at De Nederlandsche Bank, whose hospitality is gratefully acknowledged. The views expressed in this article do not necessarily represent those of De Nederlandsche Bank. Financial support from OTKA grant No. K76868 is gratefully acknowledged.


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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.BruegelBrusselsBelgium
  2. 2.Institute of Economics of the Hungarian Academy of SciencesBudapestHungary
  3. 3.Corvinus University of BudapestBudapestHungary

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