Title:
The Effectiveness of Conventional and Unconventional Monetary Policy in CEE countries using TVP-FAVAR models

Authors:
Alexandra Cheptis, Robert Adrian Grecu, Miruna-Mihaela Vasilca, Romania

Abstract:

The paper analyses the role of monetary policy in economic activity and studies the responses of the economic growth rate and inflation rate to conventional and unconventional monetary shocks in three Central and Eastern European countries: Romania, Hungary, and the Czech Republic. The research focuses on the recent evolution of the economy affected by the health crisis, military conflict in Ukraine, and high inflation. The study offers a high degree of novelty using Vector Autoregressive models with Time-Varying Parameters and common factors (TVP-FAVAR). The results of the estimation are consistent with expectations and economic theory, and the models could provide clear view of the impact of monetary policy measures applied, depending on the phase of the economic cycle. The TVP-FAVAR models could give assistance to policymakers in the formulation of the most suitable monetary policy measures in the economic recovery process and maintenance of price stability.

DOI: https://doi.org/10.51505/IJEBMR.2024.81006