THE REAL EFFECTS OF MONETARY-POLICY IN THE EUROPEAN-UNION - WHAT ARE THE DIFFERENCES

The main finding of this paper is that the European Union (EU) countri es fall into two broad groups according to the effects of monetary pol icy adjustments on economic activity. Estimates based on a vector auto regression model indicate that the full effects of a contractionary mo netary shock on output in one group of EU countries (Austria, Belgium, Finland, Germany, the Netherlands, and the United Kingdom) take rough ly twice as long to occur, but are almost twice as deep as in the othe r group (Denmark France, Italy, Portugal, Spain, and Sweden). The pape r discusses the implications of these results for the effective conduc t of monetary policy in the euro area.