Local responses to a global monetary policy : The regional structure of financial systems

This paper contrasts the different regional effects of an homogeneous monetary policy, and studies the local characteristics that underlie these differential responses. To this purpose, we use Spanish regional data and estimate a vector autoregression (VAR) model using seemingly unrelated regression (SUR) techniques to characterise regional responses. Results provide evidence of statistically different regional responses of real variables to monetary policy shocks. We use these estimated responses to analyse if they depend on regional characteristics. Results show that manufacturing sectors, a negative financial position, as well as the degree of nominal wage indexation, enhance the effect of monetary policy.