Publications

This paper overviews early research which has gone into the possible effects of the recent tensions in international trade. We have witnessed the increase and the promises of future increase in tariffs, in the case of the new trade policy of the US, and the promises of the future increase in the non-tariff barriers (possibly even tariffs) in the UK’s decision to leave the EU. The focus in the research is mostly on trade policy and on the results, insights, and conclusions, while the discussion on the econometric specification or estimation of the models is out of scope.

The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

The paper discusses monetary policy stance assessment in times of both conventional and unconventional monetary policy. Prior to the financial crisis, many central banks had one primary target and one instrument, the short-term rate. Over the years there was a consensus that the rule-of-thumb characterization known as the Taylor rule could broadly outline the policy and supplement discretionary policy. In the post-crisis period, one instrument was no longer sufficient and unconventional measures, such as large-scale asset purchases and forward guidance, were put in the policy makers’ agendas. Therefore, assessing the impact of the implemented unconventional measures and understanding the overall monetary policy stance in traditional ways no longer suffices, while finding new suitable ways is not an easy task. The shadow rate literature is able to circumvent the lower bound constraint and incorporate the monetary policy accommodation provided by the asset purchase programmes. However, application of the shadow rate estimates, in order to assess monetary policy stance, has to be done with caution since the estimates lack robustness.

The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

In this paper we study the effect of a (standard) monetary policy shock in the euro area on the Lithuanian economy. For this purpose we employ a structural vector autoregressive (SVAR) model incorporating variables from both, the euro area and Lithuania. We identify the system using short-term zero restrictions. The model exhibits a block exogenous structure to account for the fact that Lithuania is a small economy and Lithuanian macro variables do not have a significant effect on the euro area variables. In general, we find that a monetary policy shock in the euro area has a stronger effect on the Lithuanian economy than it does on the euro area economy, though the effects are not significant, preventing firm conclusions. We further broaden our analysis employing a panel VAR model for the three Baltic states. This allows us to not only explore the time variation of the euro area monetary policy transmission in the Baltics, but also helps to verify our initial results. The effects are stronger when estimated using the panel VAR model.

JEL Codes: C32, C33, E52.

The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.