US and Euro Area Monetary Policies – What Are the Interrelationships

• Název práce v češtině: Měnová politika USA a Eurozóny - jaké jsou vztahy?
• Název v anglickém jazyce: US and Euro Area Monetary Policies – What Are the Interrelationships
• Klíčová slova anglicky: monetary policy, interrelationships, Euro area, United States
• Akademický rok vypsání: 2016/2017
• Typ práce: bakalářská práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: prof. Roman Horváth, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 09.11.2016
• Datum zadání: 09.11.2016
• Datum a čas obhajoby: 14.06.2017 09:00
• Místo konání obhajoby: Opletalova - Opletalova 26, O314, Opletalova - místn. č. 314
• Datum odevzdání elektronické podoby: 16.05.2017
• Datum proběhlé obhajoby: 14.06.2017
• Oponenti: PhDr. Mgr. Martina Jašová, Ph.D.

Seznam odborné literatury

• Andrew HUGHES HALLETT (University of St Andrews) - Implications for the euro area of divergent monetary policy stances by the Fed and the ECB

• Kerstin BERNOTH, Philipp J. KöNIG (DIW Berlin) - Implications for the Euro Area of Divergent Monetary Policy Stances by the Fed and the ECB – The role of financial spillovers

• Horváth, R., Rusnák, M. (2008). “ How Important Are Foreign Shocks in Small Open Economy? The Case of Slovakia ” IES Working Paper 21/2008. IES FSV. Charles University.

• Roman HORVATH (CASE and Charles University) - Divergent monetary policies of the US Federal Reserve and the ECB: Implications for the euro area

• Ansgar Belke & Yuhua Cui, 2009. "US–Euro Area Monetary Policy Interdependence – New Evidence from Taylor Rule Based VECMs," Ruhr Economic Papers 0085, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

• Jing Cynthia Wu & Fan Dora Xia, "Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound", Journal of Money, Credit, and Banking, 2016, 48(2-3), 253-291

Předběžná náplň práce

Research question and motivation
This thesis is going to study how strongly the monetary policy of the United States influences the Euro Area – specifically whether the Fed is the leader and the ECB the follower, especially in the context of the spillovers of the financial crisis. Secondly the thesis is going to examine the usefulness of estimating the relationship using the Wu-Xia shadow federal funds rate relative to the federal funds rate in order to include the effects of quantitative easing and other non-conventional and non-standard monetary policy measures more properly.

Contribution
The aim of this bachelor thesis is to uncover the interdependence of monetary policies between the United States and the Euro Area, the main contribution of this thesis relative to the existing literature is the possibility to show what effects were caused by the financial crisis and to examine the responses to the crisis and to show whether the Wu-Xia shadow federal funds rate is a better explanatory variable than the regular federal funds rate.

Methodology
I am going to employ the vector autoregressive model, using at least 4 variables (GDP. Inflation, interest rates, exchange rate) in time series starting with the year 1999 to the present day with monthly frequency. Then follows the impulse response to monetary policy and macroeconomic shocks followed by the variance decomposition, academic reference in Sims 1980 Macroeconomics and Reality, Econometrica. I am going to estimate a reduced form VAR model, which will be identified using Choleski decomposition. The ordering of variables will follow the previous literature such as Horvath and Rusnak, 2009 Global Economy Journal.

Outline
1. Introduction
2. Motivation and underlying data presentation
3. Monetary policy of the ECB and Fed timeline and outline
4. Vector autoregressive model construction
5. Data analysis, impulse responses to shocks and variance decomposition
6. Conclusion