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The Effects of Foreign Exchange Interventions in a Small Open Economy: The Case of the Czech Republic in a World Context
Timko, Jan ; Holub, Tomáš (advisor) ; Dědek, Oldřich (referee)
In this thesis we examine the effect of foreign exchange interventions in small open economy, focusing on the Czech experience. In the first part we model volatility development before and after the intervention using GARCH model. In the second part we estimate relationship between macroeconomical variables using vector autoregressive model. In this part we estimate impulse response function of exchange rate and inflation. In second part of VAR modeling we provide counterfactual analysis, which compare actual development of variables with alternative scenario in which the interventions would not happen . Our results suggest that the interventions is associated with few months delayed decrease in volatility. Base on scenario analysis the interventions increased inflation by approximately 1.5 % and without the intervention the economy would in deflation around -1 % nowadays. KEYWORDS: Vector autoregression, Volatility modelling, Monetary policy, Intervention Author's e-mail: jantimko16@gmail.com Supervisor's e-mail: tomas.holub@cnb.cz
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Exchange Rate Volatility Effect on Trade Balance in Czech Republic
Naletova, Anastasiia ; Kočenda, Evžen (advisor) ; Komárek, Luboš (referee)
This master's thesis investigates the impact of exchange rate volatility on trade balance of the Czech Republic during 2005-2016. The analysis is performed on the constructed panel dataset for 53 trading partners of the Czech Republic by estimating the trade gravity models. The realized volatility values are obtained for 43 Czech koruna pairs against the local currencies. The variables included into the empirical analysis are the GDP and population of the Czech Republic and its trading partners, realized volatility, weighted distance, contiguity, direct access to the sea and information on EU and OECD membership. The methodological approaches in the analysis are calculations of realized exchange rate volatility and for gravity models panel data estimation techniques: pooled OLS, fixed effects and random effects. The gravity models are compared by the formal tests, and the most efficient among them is the fixed effects. The results of the estimated augmented model reveal significant positive impact of exchange rate volatility on trade balance of the Czech Republic. The key variables that have the expected significant positive impact on trade balance are GDP of the Czech Republic and its trading partners in the basic model, population of the Czech Republic and EU membership in the augmented model....
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The Effects of Foreign Exchange Interventions in a Small Open Economy: The Case of the Czech Republic in a World Context
Timko, Jan ; Holub, Tomáš (advisor) ; Dědek, Oldřich (referee)
In this thesis we examine the effect of foreign exchange interventions in small open economy, focusing on the Czech experience. In the first part we model volatility development before and after the intervention using GARCH model. In the second part we estimate relationship between macroeconomical variables using vector autoregressive model. In this part we estimate impulse response function of exchange rate and inflation. In second part of VAR modeling we provide counterfactual analysis, which compare actual development of variables with alternative scenario in which the interventions would not happen . Our results suggest that the interventions is associated with few months delayed decrease in volatility. Base on scenario analysis the interventions increased inflation by approximately 1.5 % and without the intervention the economy would in deflation around -1 % nowadays. KEYWORDS: Vector autoregression, Volatility modelling, Monetary policy, Intervention Author's e-mail: jantimko16@gmail.com Supervisor's e-mail: tomas.holub@cnb.cz
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