Politická ekonomie X:X | DOI: 10.18267/j.polek.1524

FED vs. ECB: Which matters most for Visegrad economies? Evidence from a Bayesian VAR model

Monika Junicke, Vincenzo Merella
Monika Junicke (corresponding author), International Research Centre, Prague University of Economics and Business, Prague, Czech Republic
Vincenzo Merella, International Research Centre, Prague University of Economics and Business, Prague, Czech Republic; Department of Economics and Business Sciences, University of Cagliari, Cagliari, Italy

This paper employs a VAR model with economically meaningful structural restrictions to examine how monetary policy shocks originating from the FED and the ECB influence macroeconomic variables in Central European economies, specifically the Visegrad Group (V4). We investigate whether US monetary policy shocks impact the V4 independently or primarily through Germany. Our results indicate that US monetary policy shocks significantly affect V4 macroeconomic variables, at times equalling or surpassing the influence exerted by their European counterparts, even after accounting for indirect effects transmitted through Germany. Additionally, our findings highlight the dominance of the income absorption effect, leading to output contractions in these small open economies.

Keywords: Monetary policy, Federal Reserve System, European Central Bank, Visegrad Group, structural restrictions, monetary policy shocks

Received: May 29, 2025; Revised: July 28, 2025; Accepted: August 4, 2025; Prepublished online: January 21, 2026 

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