The Research On The Regional Effects Of Monetary Policy In Eurozone

Since the euro zone was established in 1999,the euro area member states lost the sovereignty of monetary policy,the implementation of unified monetary policy in the territory,which is considered the regional monetary cooperation to achieve the highest level of important symbol.However,in recent years,regional monetary cooperation crisis broke out for many times in the euro area,especially in the 2009,The European sovereign debt crisis,which once triggered a global financial market worries that the euro zone will collapse,the euro zone's implementation of unified monetary policy and the dispersion of the asymmetric structure of the fiscal policy is also the main reason for the crisis and the increasingly strong criticism.This paper tries to get back to the nature of the euro-zone problem discussed with the monetary cooperation,the core part we concerned of the problem is that if the euro-zone countries have a big difference on financial development,the dynamic change of the difference of financial development,namely the convergence of financial development,will the unified monetary policy between each member of the regional effects of monetary policy.Three relevant research achievements in this field inspired our academic interest for this problem:first,the theory of optimum currency areas(OCA)holds that,regional countries which can meet some real economy standards together,regional monetary cooperation and even the use of single currency will be their optimal exchange rate regime choice.The theory contains an important theoretical judgment,in an optimal currency area,even if the member states of structural differences exist in the real economy,as long as they meet the economic homogeneity criteria,wage and price elasticity and elements of liquidity has enough flexibility,the implementation of unified monetary policy in the area are not produced the regional effects of monetary policy(Magnificio,1973).Second,after the construction of the euro zone,the existing research suggests that regional effects of monetary policy in the euro zone,but for the cause,there are considerable differences,some research emphasis on the real economy structural differences,in contrast with the financial part of the research of structural differences,unable to agree.Third,the convergence of the recent financial development in the field of the latest research result shows that a country's financial development condition and the effectiveness of the implementation of monetary policy has a direct and complex relationship(Krause&Rioja,2006;Carranza et.Al.,2010);A country's financial development level will affect the choice of exchange rate regime(Bordo&Flandreau,2003;Aghion et al.,2009;Lin&Ye,2011).In view of that the exchange rate coordination is the advanced stage of regional monetary cooperation,which means that the financial development degree is likely to be similar one of the important initial conditions of regional monetary cooperation;From a dynamic perspective,in the process of regional monetary cooperation,each member of the financial development of convergence is likely to impact on monetary cooperation process,one of the influence may reflect on the monetary policy effectivenessFor this,this paper studies this situation,focusing on the convergence of financial development of euro-zone members of the monetary policy will significantly affect the euro area regional effects of monetary policy.this paper used,first of all,sigma convergence test and beta testing method for the euro zone test convergence of regional financial development.Second,by using two different methods to test the existence of the euro zone's regional effects of monetary policy:one is to use regression model to estimate dynamic panel in different areas of the euro-zone monetary policy multiplier,and compare the different area the size of the monetary policy multiplier;The other is the construction of a multivariate panel VAR model,impulse response analysis and comparison of monetary policy to the actual economic variables,time delay and impulse response function of peak cumulative effect,and compared the effectiveness of monetary policy in different areas.Finally using the Pearson correlation coefficient test of regional financial development convergence speed and the correlation between regional monetary policy effectiveness.In this paper,the study found that:(1)the euro-zone member states exist obvious regional financial development convergence phenomenon;(2)the unified monetary policy in the member states of different regions and different income levels effect;(3)members convergence of financial development is associated with the single monetary policy effect is remarkable.(4)the "piigs" financial convergence rate is lower than other euro-area members,unified monetary policy to the "piigs" economic recovery have little influence.Finally,The research results show that in the process of a regional monetary cooperation,in addition to the OCA theory which emphasizes the real economy factors,the financial development of convergence is also the important factors influencing the effect of monetary cooperation.t the convergence of the monetary policy and the financial development explain the outbreak of the crisis from "piigs" effectively from above.