THE IMPACT OF MONETARY POLICY INSTRUMENTS ON THE EURO AREA LABOR MARKET IN THE CONTEXT OF COVID-19 PANDEMIC – TIME-VARYING PARAMETER VAR MODEL APPROACH

TOMÁŠ OLEŠ

https://doi.org/10.53465/EDAMBA.2021.9788022549301.359-368

 

Abstract: The paper examines simplified backward and forward transmission mechanism of monetary policy instrument to perturbation in un-employment rate. We apply three variables time-varying VAR model, with stochastic volatility, to determine the dynamic relationship among unemployment rate, interest rate and supply of money in the context of Euro Area. We concluded that, there is a possible stabilization potential through the increase in the money supply has dramatically risen before (and after) the COVID-19 pandemic; the reaction function of ECB to negative unemployment shock has been tied-up by the zero low bound and space for intense interest rate decrease has been empirically reduced in the pandemic times.

Keywords: monetary policy, pandemic, unemployment

JEL classification: C32, E37, E52

Fulltext: PDF

Online publication date: 12 May 2022

 

To cite this article (APA style): 

Oleš, T. (2022). The Impact of Monetary Policy Instruments on the Euro Area Labor Market in the Context of COVID-19 Pandemic – Time-Varying Parameter VAR Model Approach. Proceedings from the EDAMBA 2021 conference, 359 – 368. https://doi.org/10.53465/EDAMBA.2021.9788022549301.359-368