EFFECTS OF SINGLE MONETARY POLICY ON THE SELECTED ECONOMIC AND MONETARY UNION COUNTRIES. CASE OF SO-CALLED "PIIGS" COUNTRIES

Monetary policy represents one of the most important policies of each country's policy mix. Understanding how monetary policy works and affects real economy is essential in understanding how changes in the settings of monetary instruments such as interest rate increase or decrease will affect the real economy and which variables will react. In this paper we analyse the implications of monetary policy shocks in countries of monetary union in Europe. The focus is on the estimation of the response of economic variables such as a gross domestic product, exchange rate and price level. The model used is based on the vector autoregression approach that enables to estimate the extent and the persistence of monetary policy shocks for tested variables in case of selected European economies.