The Monetary Transmission Mechanism in the Euro Area: A VAR-Analysis for Austria and Germany
With the transition to the European Monetary Union (EMU), the instrument of monetary policy
for individual member countries has been abolished. This step has led to serious challenges for
the dierent states to stabilize their economies to various economic shocks. Dierent labor
market rigidities lead to dierent responses to monetary impulses in the countries. This paper
deals with this problem by setting up a VAR-analysis to investigate the dierent shocks on
Germany and Austria. The results show that Germany experiences less uctuation in growth
and unemployment than Austria which can be assigned to higher labor market rigidities.