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Research seminar by Zornitsa Todorova (Bocconi University)


We would like to cordially invite you to a research seminar that will be given by our guest Zornitsa Todorova who is a PhD student at the Department of Finance, Bocconi University, Milano.

When: TuesdayFebruary 20, 17:00 - 18:20   

Where: Institute of Economic Studies, FSV UK, Opletalova 26, Prague 1, room 314   

Title of the paper: "Network Effects of Monetary Policy: Evidence from Global Value Chains"   

Abstract: The paper investigates whether production networks are an important channel for the propagation of monetary policy shocks to the stock market in the Euro-area. To do so, it exploits a new comprehensive dataset on a time-series of input-output connections between European industries matched with sector-level stock market data. This dataset allows me to distinguish the distribution of the output of industries over 473 user categories (418 intermediate industries and 55 final customers) across 11 Eurozone countries. A simple production model with intermediate inputs, which translates into a spatial autoregressive model guides the empirical strategy of the paper. Monetary policy shocks are identified along two dimensions: one related to the current level of short- term rates (target) and a second related to expectations about the future path of monetary policy (path). Using an event-study approach around ECB Monetary Policy Announcement dates and novel tools from spatial econometrics, this is the first paper to show that between 30% and 40% of the overall European stock market reaction is due to higher-order network effects. Then, the paper investigates model-implied heterogeneous effects. First, it shows that industries characterized by higher demand elasticity are more sensitive to monetary policy shocks. Second, the paper documents that the effect of the shock is intensified through time and across the supply chain from downstream to upstream industries. Third, the paper explores the implications of the network structure for the transmission of monetary policy. Peripheral industries are most sensitive to negative shocks, whereas central industries are most influential and serve as an amplification mechanism for the transmission of shocks. Finally, the effect of network connections outside of the Euro-area is considered. The paper finds that the response to monetary policy shocks is considerably mitigated for industries located centrally in the global production network.   

Link to full paper:  

Looking forward to meeting you


Autor - doc. PhDr. Jozef Baruník Ph.D.


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