scholarly journals Monetary Policy Before and After the Financial Crisis and Its Economic and Legislative Impacts – Case of The Czech Republic

2019 ◽  
Author(s):  
Liběna Černohorská ◽  
Jana Janderová ◽  
Veronika Procházková
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Financial Crisis ◽  
Interest Rates ◽  
Foreign Exchange ◽  
Inflation Targeting ◽  
Constitutional Court ◽  
The Czech Republic ◽  
Before And After ◽  
National Economies

The article analyses monetary policy response to the world financial crisis and focuses more closely on the monetary policy of the Czech National Bank (CNB) at this time. Until 2007, the implementation of monetary policy in OECD countries was perceived very positively. However, the financial crisis has clearly shown that the world’s financial markets are highly interconnected, and this can have a major impact on individual national economies. Therefore, the monetary policy strategy has changed from a policy based on the so-called flexible inflation targeting. Ensuring price stability is emphasised as part of the monetary policy role of the CNB in the provisions of Article 98 of the Constitution, in the Czech Republic. CNB is perceived as one of the most independent central banks, the contituional dimension of its independence being confirmed by case law of the Czech Constitutional Court. In response to the financial crisis, CNB was forced to pursue unconventional monetary policy in the form of foreign exchange interventions between 2013 and 2017. However, during the time period of these interventions, CNB policy did not lead to achievement of the inflation target. Following the completion of foreign exchange interventions, CNB returned to conventional monetary policy through interest rates.

In search for a new anchor: inflation targeting in the czech republic

2000 ◽  
Vol 9 (3) ◽  
Author(s):  
Jiří Jonáš
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Policy Framework ◽  
The Czech Republic ◽  
Fourth Part ◽  
National Bank ◽  
New Framework ◽  
Monetary Policy Framework

In December 1997 the Czech National Bank introduced a new framework for the conduct of monetary policy, inflation targeting. This article examines the preliminary experience with inflation targeting in the Czech Republic. In the second part, we discuss the reasons that have led the Czech National Bank to introduce this monetary policy framework. Third part describes principal operational features of inflation targeting in the Czech Republic, and discusses the specifics of inflation targeting under the conditions of an economy in transition. Fourth part reviews the conduct of monetary policy under the new regime, focusing particularly on how the new policy framework has affected central bank's decisions about interest rates. Fifth part discusses some reasons why implementation of inflation targeting during the first two years was difficult, and sixth part evaluates the experience with inflation targeting and provides some suggestions for improving the framework.

scholarly journals Loose Monetary Policy and Corporate Investment of Manufacturing Firms in the Czech Republic

2018 ◽  
Vol 18 (4) ◽  
pp. 371-385
Author(s):  
Veronika Kajurová ◽  
Dagmar Linnertová
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Interest Rates ◽  
Corporate Investment ◽  
Manufacturing Firms ◽  
Investment Activity ◽  
The Czech Republic ◽  
Low Interest Rates ◽  
Negative Effect

Abstract The aim of the paper is to evaluate the effects of loose monetary policy on corporate investment of manufacturing firms in the Czech Republic during the period between 2006 and 2015. The main focus of the paper is on the effect of low interest rates on investment activity of Czech firms; additionally, the effects of interactions between interest rate and other firm-specific variables are investigated. The results indicate that corporate investment is positively associated with firm size, investment opportunities, and long term debt. Also, a negative effect of the cash position is found. Further, the findings show that monetary policy is a significant determinant of firm investment activity: when the monetary policy is loose, investment is positively affected. Furthermore, differences in the determinants of investment between highly and low leveraged firms were revealed.

SWITCHING TO GOOD POLICY? THE CASE OF CENTRAL AND EASTERN EUROPEAN INFLATION TARGETERS

2019 ◽  
Vol 24 (8) ◽  
pp. 2104-2128
Author(s):  
Andrej Drygalla
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Inflation Targeting ◽  
Dynamics Simulation ◽  
Output Volatility ◽  
The Czech Republic ◽  
Policy Regimes ◽  
Switching Dynamic ◽  
Dynamic Stochastic ◽  
Good Policy

The paper analyzes how actual monetary policy changed following the official adoption of inflation targeting in the Czech Republic, Hungary, and Poland and how it affected the volatilities of important macroeconomic variables in the years thereafter. To disentangle the effects of the policy shift from exogenous changes in the volatilities of these variables, a Markov-switching dynamic stochastic general equilibrium model is estimated that allows for regime switches in the policy parameters and the volatilities of shocks hitting the economies. Whereas estimation results reveal periods of high and low volatility for all three economies, the presence of different policy regimes is supported by the underlying data for the Czech Republic and Poland, only. In both economies, monetary policy switched from weak and unsystematic to strong and systematic responses to inflation dynamics. Simulation results suggest that the policy shifts of both central banks successfully reduced inflation volatility in the following years. The observed reduction in output volatility, on the other hand, is attributed more to a reduction in the size of external shocks.

scholarly journals Interest rates and prices causality in the Czech Republic – Granger approach

2009 ◽  
Vol 55 (No. 7) ◽  
pp. 347-356 ◽  
Author(s):  
J. Poměnková ◽  
S. Kapounek
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Interest Rate ◽  
Interest Rates ◽  
Inflation Rate ◽  
Aggregate Demand ◽  
Real Economy ◽  
Investment Activity ◽  
The Czech Republic ◽  
The Interest Rate

Monetary policy analysis concerns both the assumptions of the transmission mechanism and the direction of causality between the nominal (i.e. the money) and real economy. The traditional channel of monetary policy implementation works via the interest rate changes and their impact on the investment activity and the aggregate demand. Altering the relationship between the aggregate demand and supply then impacts the general price level and hence inflation. Alternatively, the Post-Keynesians postulate money as a residual. In their approach, banks credit in response to the movements in investment activities and demand for money. In this paper, the authors use the VAR (i.e. the vector autoregressive) approach applied to the “Taylor Rule” concept to identify the mechanism and impact of the monetary policy in the small open post-transformation economy of the Czech Republic. The causality (in the Granger sense) between the interest rate and prices in the Czech Republic is then identified. The two alternative modelling approaches are tested. First, there is the standard VAR analysis with the lagged values of interest rate, inflation and economic growth as explanatory variables. This model shows one way causality (in the Granger sense) between the inflation rate and interest rate (i.e. the inflation rate is (Granger) caused by the lagged interest rate). Secondly, the lead (instead of lagged) values of the interest rate, inflation rate and real exchange rate are used. This estimate shows one way causality between the inflation rate and interest rate in the sense that interest rate is caused by the lead (i.e. the expected future) inflation rate. The assumptions based on money as a residual of the economic process were rejected in both models.

scholarly journals Are Central Banks In CEE Countries Concerned About The Burden Of Public Debt?

2017 ◽  
Vol 20 (1) ◽  
pp. 35-51 ◽  
Author(s):  
Joanna Mackiewicz-Łyziak
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Interest Rates ◽  
Public Debt ◽  
Central Banks ◽  
Output Gap ◽  
Markov Switching Model ◽  
The Czech Republic ◽  
Policy Regimes ◽  
Switching Model

The aim of this study is to analyze the monetary policy rules in the Czech Republic, Hungary and Poland, with public debt as an additional explanatory variable. We estimate linear rules by the GMM estimation and non-linear rules, using the Markov-switching model. Our findings suggest that in the Czech Republic and Poland the monetary authorities respond to growing public debt by lowering interest rates, while in Hungary the opposite may be observed. Moreover, we distinguish between passive and active monetary policy regimes and find that the degree of interest rate smoothing is lower and the response of the central banks to inflation and/or output gap is stronger in an active regime. In the passive regime, the output gap seems to be statistically insignificant.

Overheating may tighten Central Europe monetary policy

2018 ◽  
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Interest Rates ◽  
Negative Impact ◽  
The Czech Republic ◽  
Content Type ◽  
Forward Guidance ◽  
Consumer Prices ◽  
Global Liquidity ◽  
Capital Outflows

Significance The meetings are expected to provide forward guidance on monetary policy. With consumer prices reaching a five-and-a-half year high in Hungary and a seven-month high in the Czech Republic, attention has turned to the future trajectory of Central European (CE) interest rates. Tightening would run against the populist streak of governments in both Prague and Budapest. Impacts Rate hikes in the Czech Republic and eventually also in Hungary by mid-2019 may contribute to a broad-based slowdown in growth next year. Tighter rates may moderate the headline inflation rate in January-June 2019, partly offsetting the negative impact of economic overheating. CE currencies may gradually strengthen, helping to shield against excessive capital outflows, as global liquidity conditions tighten. Some monetary policy divergence is likely within CE, as Poland’s central bank is unlikely to push for higher interest rates before end-2019.

scholarly journals Inflation targeting and monetary policy rule of the czech national bank

2001 ◽  
Vol 10 (4) ◽  
Author(s):  
Helena Horská
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Inflation Targeting ◽  
The European Union ◽  
Policy Rule ◽  
The Czech Republic ◽  
Monetary Policy Rule ◽  
National Bank ◽  
Basic Features ◽  
Monetary Convergence

This paper deals with the inflation targeting regime in the Czech Republic. The study argues that inflation targeting is a monetary policy strategy that can be adopted by the central banks in more advanced transition economies. A dynamic model of inflation targeting in the Czech Republic is discussed in the context of achieving monetary convergence to the European Union. The specified monetary policy rule describes the basic features of the Czech National Bank's behaviour in the period March 1996 to June 2000.

scholarly journals MONETARY POLICY BEFORE AND AFTER THE FINANCIAL CRISIS. EVIDENCE FROM INFLATION TARGETING COUNTRIES IN CENTRAL AND EASTERN EUROPE

2017 ◽  
Author(s):  
Ioana Plescau
Keyword(s):  
Monetary Policy ◽  
Comparative Analysis ◽  
Financial Crisis ◽  
Eastern Europe ◽  
Inflation Targeting ◽  
Central And Eastern Europe ◽  
Central Banks ◽  
Review Of The Literature ◽  
Before And After ◽  
The 2008 Financial Crisis

The aim of our study is to review the monetary framework and instruments adopted by the inflation-targeting countries in Central and Eastern Europe, from 2005-ownwards. We employ a qualitative approach and develop a comparative analysis of the changes that occurred in the conduct of monetary policy after the 2008 financial crisis. The results highlight that the central banks in our sample have adjusted their policy in order to counteract the effects of the financial crisis and adopt different instruments to fulfill this aim. The contribution of our study is twofold. First, we offer a review of the literature regarding the adjustments in the monetary policy after the crisis and their effectiveness. Second, we make a comparative analysis between countries with respect to the path of monetary policy from conventional to unconventional and assess the (potential) way back.

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