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Interconnection between labor market and monetary policy: NAIRU, unemployment hysteresis and monetary policy responses
Slaný, Martin ; Tomšík, Vladimír (advisor) ; Mandel, Martin (referee) ; Žák, Milan (referee)
This dissertation thesis deals with relation between labour market and monetary policy referring to two fundamental theoretical concepts -- natural rate hypothesis (or NAIRU) and unemployment hysteresis hypothesis. The first chapter outlines the most frequent values of the Phillips curve, the fundamental model of macroeconomics theory in the relation between the labour market and the monetary policy. The following chapter deals with the exogenous NAIRU concept which works as natural unemployment rate approximation. The unemployment hysteresis deals with the NAIRU as endogenous variable which is dependent on preceding imbalanced situations on labour market. The thesis outlines the main causes of the hysteresis: capital scrapping effect, role of the long-term unemployment and the insider-outsider hypothesis. The third chapter also comprises simple econometric tests of both particular mechanisms and the hysteresis itself based on usual unit roots tests. The results show the hysteresis using data from both the Czech Republic and Central and Eastern Europe countries (CEEC). The fourth chapter deals with monetary-political implications of the unemployment hysteresis. The practical part of the thesis is based on two hypotheses of the relation between inflation (policy interest rate) and NAIRU. The last chapter based on the VAR model outlines short-term relations between the labour market and monetary policy variables. Long-term relations are tested by both the co-integration analysis and vector error correction model (VECM). These models are examined on the data from the Czech Republic and Poland (2000-2013). The thesis also applies pooled regression estimate for ten CEEC. The results show that the monetary policy does have impact on the labour market not only in the short-term but also in the long-term period and thus they confirm the hysteresis hypothesis
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Comparation of Alterantive Policy Rules in a Structural Model of the Czech Republic
Hledík, Tibor ; Tomšík, Vladimír (advisor) ; Kodera, Jan (referee) ; Komárek, Luboš (referee)
The main goal of this thesis has been a study of alternative policy rules in a small structural model calibrated to capture the Czech economy. After the overview of the historic development of economic theory and structural modeling we have specified a small open economy model that has served as a main technical tool for the analysis. The model represents a framework, where forward-looking model-consistent expectations are formed with respect to the development of the exchange rate and interest rates. Inflation expectations are forward looking too with some nominal rigidities in inflation dynamics. The model's structure is relatively simple. The IS curve captures the dynamics of real GDP, that exhibits real rigidity, motivated by habit formation or investment adjustment costs. In our specification the real GDP is a function of (the deviation of) real XR, real IR and foreign demand (from corresponding equilibrium levels). The Phillips-curve is based on the F-M type wage setting behavior, therefore it enables to consider domestic prices, that are modeled as mark-ups over wages. CPI inflation then consists of domestic, imported and administered inflation, including the effect of any indirect taxes changes. The exchange rate is modeled by the UIP arbitrage condition. Exchange rate expectations are forward-looking, but with some inertia in expectation formation. Interest rates with one year maturity are also modeled as an arbitrage condition on the money market, they are fully model-consistently forward looking. The model is closed by a Taylor-type forward-looking policy rule. The interest rate exhibits some inertia and feeds back from deviation of inflation from target and output from its equilibrium. The specification (parameterization) of the rule is general enough to examine CPI and domestic inflation targeting. The model specification has been followed by empirical work leading towards the implementation of the previously specified model on Czech data. Based on the sources of the Czech Statistical Office, Czech National Bank, Consensus Economics Inc., we first processed the data by executing seasonal adjustment and other transformations necessary for being consistent with the definition of model variables. The database has been created by an automatic MATLAB based routine, therefore the calculations were relatively easy to update. The database being completed, we have set up a Kalman-filter for determining equilibrium values for the real interest rate, exchange rate and output. At the same time through Kalman filtering we identified all model residuals. We paid special attention to the decomposition of the output gap and discussing In order to assess the overall dynamic properties of the model and judge how well the model fits the data, we conducted several exercises. First we decomposed some of the important endogenous variables of the model to shocks to see, whether the identified shocks are in line with our intuition and episodes of the recent Czech economic history. We found, that the shocks are not in contrast with some of the clearly distinguishable episodes. After the shock decomposition we run in-sample simulations to see, how well the model is able to fit the reality two years ahead. We found the overall results quite encouraging. We were able to fit quite well the output gap as well as MP inflation. Domestic inflation has been slightly more inertial in model simulations than in reality, but even in this case the results were acceptable. The model was not able to fit the 2001-2 appreciation of the nominal XR footnote{Understandably it neither forecasted well the fast fall in inflation after the appreciation period.}, which is not a big surprise. The model calibration part of the thesis concludes, that the model fits the data and economic story reasonably well.
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Analyses of the regulation's and supervision's models in the financial market
Jakub, František ; Musílek, Petr (advisor) ; Tomšík, Vladimír (referee) ; Jirák, Pavel (referee)
My thesis is directed to the definition, description and comparison of models of the financial market's regulation and supervision. The attention is addressed in particular to institutional aspects of individual systems, advantages and risks which are connected with them, and also to reasons which trigger changes in single countries. The internacional standards are basis for their legal anchorage in which parameters of the independence and accountibility play an immense role. The quality setting of the institutional structure is one, however not sufficient, presumption for the effective supervision's performance. It should not be an objective but only a stepping stone to achieve a better effeciency. The decision which model will be applied for the regulation and supervision is left upon national jurisdictions as it is actually them to take into account all the benefits and expenses including the economic size, structure and level of the market development, legal environment and the central bank's role. Within the last 20 years a fully integrated supervision was generally accepted in the frame of single institution for all financial market's sectors, mostly outside the central bank. Nevertheless, the contemporary regulation is scrutinized in the light of global financial crisis originated in the year 2008. On the base of actual findings it can be expressed that the current mechanism of regulation is not efficient and does not correspond with the degree of global interconnection among financial markets and the offer of inovative financial products. Although the European Union prepared amendments which came into effect from January 1st 2011, by which new bodies were established, the time for a detailed analysis of the potentional contributions has not come yet. However, I suppose the framework for regulation will again be reevaluated in the future. In my opinion no solution brings a complete eliminaton of risks concerning vulnerabilities and systematic shocks on the financial markets. The main analytic part of my thesis is focused on the current supervisory system in the Czech republic and Slovakia, which is based on fully integrated architecture within the central bank. Having used the methods of enquiry and intentional selection I verified the validity of two hypotheses: 1. National supervisory institutions grow in favour of market participants unlike the new set european bodies. 2. The current institutional form of the financial market supervision has a support of market participants in the Czech republic and Slovakia. The results imply that the first hypothesis is valid for the Czech republic only where generally exists a bigger discretion in relation to the new european regulation and supervision bodies. In the case of the second hypothesis it can be said that it was confirmed in terms of the institutional form of the financial market supervision has a major support of financial institutions and experts in both the Czech republic and Slovakia.
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Inflation Targeting in The Czech Republic: History and Current Situation Under The Circumstances of The Economic Crisis
Kolesár, Michal ; Durčáková, Jaroslava (advisor) ; Tomšík, Vladimír (referee)
Diploma thesis analyzes the inflation targeting regime. The theoretical part describes the basic mechanism of the regime, which consists of setting the inflation targets and the exceptions when the inflation rate may deviate from the targeted zone. Further part describes production of conditional and unconditional forecasts and operational steering of central bank interest rates. In the theoretical part are also summarized the advantages and disadvantages of the regime. The empirical part of this thesis consists in application of the theoretical findings to the practical experiences of CNB. It describes the process of setting the inflation targets and forecasting procedure of CNB. Final part of the thesis summarizes the successes and failures of practical application of the regime in the Czech Republic.
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