|
|
The Exchange Rate as an Instrument at Zero Interest Rates: The Case of the Czech Republic
Franta, Michal ; Holub, Tomáš ; Král, Petr ; Kubicová, Ivana ; Šmídková, Kateřina ; Vašíček, Bořek
This study examines the use of the exchange rate by the Czech National Bank as a monetary policy instrument at the zero lower bound on interest rates. It provides a review of the economic literature on unconventional monetary policy instruments and particularly on the possibility of using the exchange rate. It explains the CNB’s reasons for further easing monetary policy and for choosing the exchange rate instrument and its specific level, and discusses its expected benefits in the case of the Czech Republic. It also explains why the CNB ultimately decided to transparently declare a one-sided exchange rate commitment with potentially unlimited foreign exchange interventions. The article concludes by assessing the impacts of the exchange rate weakening on the Czech economy to date, as compared to what the CNB had expected, and by describing the public debate of the CNB’s action and related changes in its communication strategy.
Fulltext:  PDF; PDF
|
|
|
The Impact of Monetary Policy on Financing of Czech Firms
Aliyev, Ruslan ; Hájková, Dana ; Kubicová, Ivana
This paper uses firm-level financial data for Czech firms and tests for the role of companies’ financial structure in the transmission of monetary policy. Our results indicate that higher short-term interest rates coincide with lower shares of total debt, short-term bank loans, and long-term debt. We find that firm-specific characteristics, such as size, age, collateral, and profit, affect the way in which monetary policy changes are reflected in the external financing decisions of firms. These findings indicate the presence of informational frictions in credit markets and hence provide some empirical evidence of the existence of broad credit and relationship lending channels in the Czech Republic.
Fulltext: PDF
|
|
|
Price-Level Targeting – A Real Alternative to Inflation Targeting?
Böhm, Jiří ; Filáček, Jan ; Kubicová, Ivana ; Zamazalová, Romana
This paper reviews price-level targeting in the light of current theoretical knowledge and past practical experience. We discuss progress in the economic debate on this issue, starting with the traditional arguments discussed in the early 1990s, moving to Svensson’s seminal paper in the late 1990s and ending with the most recent literature from the beginning of the new millennium. We devote special attention to the issues of the zero interest rate bound, time consistency and communication. Practical experience from Sweden in the 1930s and Czechoslovakia in the first few years after WWI is used to illustrate the advantages and disadvantages of price-level targeting. Finally, the similarities of price-level and inflation developments with hypothetical outcomes under price-level targeting are investigated in selected inflation-targeting countries.
Fulltext: PDF
|
|
|
What We Know About Monetary Policy Transmission in the Czech Republic: Collection of Empirical Results
Babecká Kucharčuková, Oxana ; Franta, Michal ; Hájková, Dana ; Král, Petr ; Kubicová, Ivana ; Podpiera, Anca ; Saxa, Branislav
This paper concentrates on describing the available empirical findings on monetary policy transmission in the Czech Republic. Besides the overall impact of monetary policy on inflation and output, it is useful to study its individual channels, in particular the interest rate channel, the exchange rate channel, and the wealth channel. The results confirm that the transmission of monetary impulses to the real economy works in an intuitive direction and to an intuitive extent. Our analyses show, however, that the global financial and economic crisis might have somewhat slowed and weakened the transmission. We found an indication of such a change in the functioning of the interest rate channel, where elevated risk premiums played a major role.
Fulltext: PDF
|
|
|
Contagion Risk in the Czech Financial System: A Network Analysis and Simulation Approach
Hausenblas, Václav ; Kubicová, Ivana ; Lešanovská, Jitka
This paper examines the potential for contagion within the Czech banking system via the channel of interbank exposures of domestic banks enriched by a liquidity channel and an asset price channel over the period March 2007 to June 2012. A computational model is used to assess the resilience of the Czech banking system to interbank contagion, taking into account the size and structure of interbank exposures as well as balance sheet and regulatory characteristics of individual banks in the network. The simulation results suggest that the potential for contagion due to credit losses on interbank exposures was rather limited. Even after the introduction of a liquidity condition into the simulations, the average contagion was below 3.8% of the remaining banking sector assets, with the exception of the period from December 2007 to September 2008. Activation of the asset price channel further increases the losses due to interbank contagion, showing that liquidity of government bonds would be essential for the stability of Czech banks in stress situations. Finally, the simulation results for both idiosyncratic and multiple bank failure shocks suggest that the potential for contagion in the Czech banking system has decreased since the onset of the global financial crisis.
Fulltext: PDF
|
|
| |
guest ::
