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Economic research bulletin (2009, No.1)
Česká národní banka
This issue tries to figure out which deviation factors were important in the Czech case. The presented articles propose several potential suspects: a series of shocks, the forecasting system and the decision-making system. The articles then suggest which methodologies could be used to decipher the deviation puzzle and provide empirical results for the Czech case. These results suggest that deviations of inflation from the target in the past decade cannot be explained by a single factor in the Czech case, and that the role of each factor changed over time. Anti-inflationary shocks are the most frequently identified source of the deviations. In the initial stage of inflation targeting, the forecasting system and the decision-making process also contributed. The analysis of factors contributing to deviations of inflation from the target provides useful lessons for improving the inflation targeting strategy. For example, a less rigid forecasting system seems to be more beneficial than a forecasting system that is changed only very rarely.
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Economic research bulletin (2008, No.2)
Česká národní banka
This issue of the CNB Research Bulletin is devoted to recent articles further enriching the current scope of theoretical frameworks, in particular dynamic stochastic general equilibrium (DSGE) models. DSGE models reflect the maximisation of the objectives of households and firms. The advantage of this approach is that it summarises the view of economic agents in a theoretically coherent way and imposes discipline on the interpretation of economic behaviour. The first three articles address the issue of optimal monetary policy strategy. Monetary policy rules and subsequent welfare analyses are central in their contribution to the literature. The fourth article deals with long-run trends.
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Economic research bulletin (2008, No.1)
Česká národní banka
The CNB has been targeting inflation for ten years now. We have decided to take this opportunity to present recent CNB research related to the inflation targeting strategy. The first two articles contribute to the discussion about how the inflation targeting strategy should be evaluated. They both point out that it is not enough simply to count how many times inflation was on target. One alternative way of measuring the success of the strategy is suggested in the first article. Partial simulations with the forecast model can help us understand the reasons for deviations of inflation from the target. Another alternative is proposed in the second article, which emphasises that success is conditional on transparent and consistent communication of inflation factors. The next two articles focus on one of the most prominent features of the inflation process – persistence – and its implications for the inflation targeting strategy. They both find that inflation persistence may be lower in the Czech case than one might expect. The third article – based on microeconomic data – provides evidence that inflation persistence has declined during the ten years of inflation targeting. The fourth article – based on macroeconomic data – estimates the level of the inflation target perceived by the public and illustrates that the strategy has gained credibility and has managed to stabilise perceived inflation at low levels.
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Economic research bulletin (2007, No.2)
Česká národní banka
This issue of the CNB Research Bulletin is focused on fiscal policy. The first article – by Aleš Krejdl – summarises the different approaches to fiscal sustainability and then applies two of the most widely used indicators – the primary gap and the tax gap – to the Czech fiscal outlook. Another way of addressing fiscal sustainability is to develop generational accounts. This is done – for the first time in the case of the Czech Republic – in the article by Kamil Dybczak. This approach sheds new light on how (un)fair our current fiscal policy is from the intergenerational perspective. The last article – by Alena Bičáková, Jiří Slačálek and Michal Slavík – aims to quantify the impact of labour taxation on labour supply and consequently on the fiscal balance. Again, this is the first time that such an analysis has been performed on the Czech economy.
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Economic research bulletin (2007, No.1)
Heřmánek, Jaroslav ; Hlaváček, Michal ; Jakubík, Petr ; Geršl, Adam ; Derviz, Alexis ; Podpiera, Jiří ; Šmídková, Kateřina
This issue of the CNB Research Bulletin looks at advances in the area of financial stability. Financial stability issues have attracted the attention of central banks in the last 10 years, mainly due to the rapid development of financial systems, the emergence of new financial products and the increased integration of the financial system across borders. These issues are extremely important for the Czech financial sector as well. One of the most widely used analytical tools for evaluating the stability of the financial sector is stress testing. The first article – by Jaroslav Heřmánek, Petr Jakubík and Michal Hlaváček – describes progress in this area as compared to earlier versions of stress testing. Progress has been made primarily in the areas of modelling credit risk and linking the stress testing to the CNB’s official macroeconomic forecast. The second and third articles – by Adam Geršl and by Alexis Derviz and Jiří Podpiera – are devoted to the issue of cross border-contagion in the Czech Republic. This problem is of great importance for the Czech Republic due to the strong foreign ownership of the Czech banking sector and the increasing crossborder flows of capital. The article by Adam Geršl uses macroeconomic data from BIS and compares the threats of cross-border contagion from other CEECs using a common creditor index. The article by Alexis Derviz and Jiří Podpiera presents the results of a sophisticated microeconomic model of lending contagion within multinational banking groups together with an empirical model of lending contagion using individual bank data from Bankscope.
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Economic research bulletin (2006, No.2)
Česká národní banka
One of the major challenges faced by the central banks of candidate countries for euro adoption is preparation for and a subsequent successful stay in the ERM II regime for at least two years while complying with the exchange rate stability criterion. This issue of the Bulletin points to the results of three papers analysing the prospects for successful sailing to the euro via ERM II as well as the risks that may emerge. Roman Horváth brings some optimism by concluding that the current levels of exchange rate variability and pressures are at the level of the euro area countries before their euro adoption, because a number of the candidates seem to be well aligned with the euro area countries. Aleš Bulíř and Kateřina Šmídková nevertheless warn that the candidates with trend real appreciation may experience problems with exchange rate misalignment in ERM II , especially if they stay longer than the minimum required period and if they accumulate high external debt during the cruise. They conclude that success in passing through ERM II is to a large extent dependent on the general success of the economies, strong economic performance being the key. Since it depends not only on domestic policies, but also on the external conditions, some element of luck is an inevitable part of the whole adventure. Luboš Komárek and Martin Melecký highlight one of the possible approaches to the estimation of the equilibrium exchange rate essential for setting the central parity before entry into ERM II – the behavioural equilibrium exchange rate (BEER ). Their estimates of exchange rate misalignments confirm that periods of low economic activity coincide with periods of an overvalued currency. Potential overvaluation therefore presents a really major risk for ERM II .
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Economic research bulletin (2006, No.1)
Česká národní banka
Why does research benefit central banks, and what type of research benefits them the most? Three members of the CNB’s Research Advisory Committee (RAC)1) – David Mayes, Carsten Detken and Nicoletta Batini – provide some answers to these questions. Central banks’ ability to attract the brightest young minds makes them one of the best hubs of applied economic research. Quality research serves as a reputation instrument demonstrating a central bank’s capability to handle future problems that may not simply replicate past experience. While established central banks may be able to achieve such reputation over the passage of time, “younger” central banks can demonstrate such capability both faster and more cheaply, based on evidence derived from their research. Successful central bank research programmes share some common traits. First, the management of the bank carefully selects research areas and projects based on the bank’s competitive advantage and its role in the global financial system. Second, ensuring quality output is of paramount importance, necessitating a welldesigned appraisal system and incentives for research. Finally, the bank ensures proper dissemination of research output.
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Economic research bulletin (2005, No.2)
Česká národní banka
Central banks have been faced with many conceptual challenges in the course of ensuring financial system stability. The list of problems includes the ability to predict the likelihood and severity of financial crises, the optimum level of prudential capital requirements, and the early detection of the risk of individual bank failure. This issue of the Bulletin highlights the results of analyses of the Czech banking sector's ability to withstand various economic shocks (M. Čihák), the bank capital requirements generated by various approaches to risky debt evaluation (A. Derviz), and the extent and consequences of inefficient cost management in banks (A. Podpiera).
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Economic research bulletin (2005, No.1)
Česká národní banka
The efficiency of macroeconomic policies depends on adequate business cycle approximation. The CNB’s approach is aimed at estimating the deviation of real GDP from its “inflation-non-accelerating” level. Such deviation – the output gap – reflects demanddriven inflationary pressures, where the Phillips curve is of primary importance. By contrast, the production function method reflects the supply-side or “capacity” view of the economy’s potential. The two approaches are subject to methodological disputes and deliver different quantitative results, thus leaving decision makers still with a considerable degree of uncertainty. That is why alternative approaches are being developed. The following articles illustrate this problem in more detail.
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Economic research bulletin (2004, No.2)
Česká národní banka
First, they look at the cyclically adjusted fiscal balance. Could we expect any contribution of Czech fiscal policy to smoothing macroeconomic fluctuations, or does it in fact display pro-cyclical features? Second, the authors calculate quasi-fiscal deficits caused by the specific costs of economic transition, such as financing enterprise restructuring or cleaning up commercial banks’ balance sheets, which are not officially included in the budgetary system. The issue is to quantify the extent to which the “official” information on overall fiscal outlays is downward-biased. Finally, there is the impact of population ageing, which the central bank must anticipate when assessing the interplay between monetary and fiscal policies. What would happen without immediate reform of the pension and health care system?
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