International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

The US monetary dominance in Europe: A structural VAR approach
Inès Abdelkafi, Rochdi Feki

In this study we compare the monetary policies of the American Federal Reserve System (FED) and the European Central Bank (ECB). We identify the effect of US monetary shocks on the decisions taken by the ECB. Using SVAR (structural vector autoregressive) methodology which showed excellent capacities to analyse macroeconomic fluctuations, estimates indicate that European monetary policies are strictly related to the FED’s decisions. Results show that the ECB changes its interest rate according to the decisions made by the FED. The other economic indicators of Economic and Monetary Union (EMU) are also affected by US monetary shocks. Thus, we bring to light the role of the American monetary policies in the transmission of subprime crisis in Europe.

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