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Origin of Current High Inflation in the Czech Economy (2022)
Dvořáková, Natálie ; Šestořád, Tomáš (advisor) ; Havránek, Tomáš (referee)
The thesis presents new evidence on the relative importance of seven domestic and foreign inflation drivers in the Czech Republic over the past two decades. A structural vector autoregressive (VAR) model with short-run zero and sign restrictions is estimated within a Bayesian framework, enabling the decomposi- tion of the sources of inflation. A comparative forecast error variance decompo- sition (FEVD) analysis is performed among three baseline models to investigate the underlying causes of the recent surge in inflation in the Czech economy. The results show a growing prominence of both domestic and foreign supply factors. Furthermore, over the entire period of 2000Q3-2022Q3, demand shocks contribute more than supply shocks to the changes in the price level. This pa- per also highlights the remarkable role of fiscal policy shocks, while monetary conditions have a minor impact. Additionally, the effectiveness of monetary policy tools is evaluated. JEL Classification F12, F21, F23, H25, H71, H87 Keywords inflation, SVAR model, monetary policy, supply and demand shocks Title Origin of Current High Inflation in the Czech Economy (2022)
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