Spatial asymmetries in monetary policy effectiveness in Italian regions

Pivoting on the idea that differences in production and financial systems may affect monetary transmission mechanisms, a global vector autoregressive (GVAR) model is built and the effectiveness of monetary policy on the real economy in the Italian regions in the period 2000–16 is tested, also taking interaction effects into account. The results show that regional gross domestic product responds positively, but asymmetrically to an expansionary monetary policy, while prices fall in the short run. It is also shown that short- and long-term interest rates react in accordance with theory.