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Examining the Link between Financial Market Efficiency and Monetary Transmission Mechanism
Krejčí, Tadeáš ; Krištoufek, Ladislav (advisor) ; Vácha, Lukáš (referee)
In an effort to examine role of capital markets' efficiency in transmission of monetary policy, 28 time series of market efficiency development are estimated with use of long-term memory and fractal dimension measures and a panel of 27 inflation targeting countries is constructed to run a random effect regres- sion. The cases of Czech Republic and Austria are thereafter more closely examined with use a vector-autoregressive and threshold vector-autoregressive frameworks on macroeconomic data spanning from 1996:Q3 to 2018:Q4. The evidence obtained through the conducted analyses support the hypothesis, that a more efficiently functioning capital market better contributes to monetary policy pass-through, or conversely, that high transaction costs, barriers to cap- ital market entry, or poor information availability may hinder the effects of central bank's monetary policy. JEL Classification F12, F21, F23, H25, H71, H87 Keywords capital market efficiency, inflation targeting, monetary transmission mechanism Author's e-mail teddy.krejci@gmail.com Supervisor's e-mail LK@fsv.cuni.cz
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The Performance of inflation targeting in emerging market economies
Reshketa, Sidita ; Holub, Tomáš (advisor) ; Turnovec, František (referee)
The aim of the thesis is to study the performance of emerging economies under the inflation targeting as a framework. This framework is characterized by the direct target that it has on inflation which should be achieved within a period. Inflation targeting was initially adopted by industrialized economies, and the outcomes throughout the years have been substantially good for other economies to join this framework. The dataset used is updated with data from after the financial crises allowing space for us to test another hypothesis about the importance of inflation targeting during the financial crises. We used difference to difference model to test our hypothesis and we concluded that inflation targeting does not have any significant statistical effect on the output growth, but it does have a statistical significant effect in the inflation rate. We also pointed out that the economies that were targeting inflation during the financial crises performed much better compared to the ones which did not. JEL Classification E31, E44, G01 Keywords Inflation targeting, emerging and developed economies, financial crises Author's e-mail sreshketa@gmail.com Supervisor's e-mail tomas.holub@cnb.cz
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Inflation Targeting as a Monetary Indicator of Central Banks
Bilková, Simona ; Bažantová, Ilona (advisor) ; Dupáková, Lenka (referee)
Inflation Targeting as a Monetary Indicator of Central Banks Abstract The diploma thesis on the subject "Inflation Targeting as a Monetary Indicator of Central Banks" aims to compare the successfulness of the inflation targeting executed by the Czech National Bank and the European Central Bank. Inflation targeting as a monetary- political regime was used for the first time almost 30 years ago and its merit is to influence the inflation rate based on the adjustments of short-term interest rates and the stabilization of inflation expectations. It is based on the accountability of central banks to fulfill the set target, their transparency and communication with the public, for example via publishing the macroeconomic prognoses. The first chapter of the diploma thesis aims to define the term central bank and inflation targeting. It deals with the purpose of central banks, their instruments to pursue monetary policy, independence and accountability of central banks, and determines the rule of central banks' monetary policy. Additionally, it explains medium- and long-term vertical Phillips curve and Taylor's rule. The second chapter addresses the topic of the Czech national bank and aims to describe its function and inflation targeting. It specifies its main purpose, instruments of the monetary policy and...
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The transmission mechanism of the monetary policy impact on the Czech banking sector
Bohovicová, Petra ; Brůna, Karel (advisor) ; Jakl, Jakub (referee)
This thesis analyzes the impact of the monetary policy of the Czech Republic on the Czech banking sector. It explains the monetary transmission mechanism in an inflation targeting regime and its channels: interest rates channel, asset price channel, exchange rate channel and credit channel. The aim of the thesis is to introduce and analyze channels of the Czech transmission mechanism by Correlation and Graphical Analysis of chosen time series and using Linear Regression Model. The analyses are calculated in MS Excel and Gretl.
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Monetary policy at a time of low interest rates and threat of deflation
Kochergin, Aleksei ; Gevorgyan, Kristine (advisor) ; Šíma, Ondřej (referee)
The aim of the bachelor thesis is to analyze the Czech economy during the period of foreign exchange interventions, and several months after them in the situation of impending deflation. The topic is chosen to be the most up-to-date statement by the Czech National Bank council on the termination of the exchange rate commitment, which will undoubtedly define the domestic economy for a certain period of time. The thesis deals with aspects that have forced the Czech national bank to intervene in the foreign exchange market, it examines the state of the economy during the implementation period of the intervention, and then after the end of the exchange rate commitment. The work is divided into three main parts. The first part of this work explains the essence of monetary policy and its application by the central bank. The second part explains the economic nature of deflation and different views on this issue. The third part focuses on the analysis of the economic situation in the Czech Republic and the policy of the central bank. The result of this analysis will be the assessment of the success of selected strategy on the example of macroeconomic indicators and the evaluation of its adequacy due to the findings.
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Analysis of the impact of currency intervention on financial markets and analysis of speculative activity
Langr, Matěj ; Dvořák, Petr (advisor) ; Mazáček, David (referee)
Abstract Objective of this thesis is calculation of the speculative position that is held by the subjects of such speculation on appreciation of Czech currency. Thesis inspects the impacts of currency interventions on domestic financial spot and future markets. Thesis also describes development in the speculative capital inflow, which was conducted with support of quantitative and qualitative data extracted from ARAD database, which runs on Czech national bank domain. Calculation were also conducted by the author of this thesis using Bloomberg Terminal data. The results of this study shows that in total 68,2 billion EUR entered Czech financial market in the form of speculative capital, as well as detailed analysis of speculative capital inflow periods and speculative strategies through which the capital entered. It was also discovered that because of the speculative capital inflow, negative deposit interest rates occurred. Impacts on future/forward markets were discovered as well as impacts on spot markets. Thesis also describes the impact on hedging activity of domestic exporters in the period of exchange rate commitment. Also the impact on inter-bank markets were described with the impact on their balance sheet. Czech republic finds itself in the era of massive foreign exchange reserves, since Czech national bank was forced to buy out EUR liquidity, thus fulfilling exchange rate commitment
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Should monetary policy pay attention to financial stability? A DSGE approach
Žáček, Jan ; Holub, Tomáš (advisor) ; Žigraiová, Diana (referee)
After the recent financial crisis of 2007, a connection between monetary policy and financial stability has started to be thoroughly investigated. One of the particular areas of this research field deals with the role of various financial variables in the monetary policy rules. The main purpose of this research is to find whether direct incorporation of the financial variables in the monetary policy rule can bring macroeconomic benefits in terms of lower volatility of inflation and output. So far, the main emphasis of the research has been placed on the investigation of the augmented Taylor rules in the context of a closed economy. This thesis sheds light on the performance of the augmented Taylor rules in a small open economy. For this purpose, a New Keynesian DSGE model with two types of financial frictions is constructed. The model is calibrated for the Czech Republic. The thesis provides four conclusions. First, incorporation of the financial variables (asset prices and the volume of credit) in the monetary policy rule is beneficial for macroeconomic stabilization in terms of lower implied volatilities of inflation and output. Second, the usefulness of the augmented monetary policy rule is the most apparent in case of the shock originating abroad. Third, there is a strong link between the financial and the...
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Comparison of monetary policies of selected central banks
Zlatý, Petr ; Borkovec, Aleš (advisor) ; Hraba, Zdeněk (referee)
This thesis compares monetary policies, institutional status and different approaches to the selection of monetary policy and setting goals of central banks in the case of Czech National Bank, the European Central Bank and the Federal Reserve System. The first chapter deals with the characteristics of the central bank, legislative regulation of the Czech National Bank is analysed there and it mentions the Czech peculiarities in the adjustment of the central bank. In addition, this chapter deals with the possibilities for the name of the central bank and there are examples of different solutions from the world. The second chapter focuses on the analysis of the central bank's position in the state. It emphasise independence as it is the core value for the central bank. This chapter also describes the regulatory and supervisory powers of the central bank and briefly discuss the composition of assets and financing of the central bank and its basic financial statements. The third chapter deals with the theory of monetary policy. Particular attention is paid to the monetary policy of inflation targeting. Furthermore, this chapter provides an overview of transmission mechanisms and describes various monetary policy instruments which central banks have. At the end of this part of the thesis there is a...
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Inflation targeting performance in emerging economies and some lessons for Moldova
Talasimova, Irina ; Holub, Tomáš (advisor) ; Mejstřík, Michal (referee)
The present paper has attempted to provide an empirically argumented basis on the existing conflict about effectiveness of IT regime on lowering inflation and inflation volatility. In the first part we perform panel analysis on a group of 43 emerging and developing economies for a more recent period ranging from 1997 to 2011, distinguishing between normal and crisis times as well as between geographical regions. Differently from common studies we applied dynamic panel model specification that controls for reverse causality of regime adoption. Despite broad arguments addresing IT ineffectiveness, our results support the regime and imply that shifting to IT will lower both inflation and inflation volatility in normal times. Model specification during the external shocks was inconclusive on the selected sample with relatively recent IT history. Regarding the geographical IT performance, we outlined that regime effectiveness was uniform along analyzed regions. In the second part we perform a preliminary analysis of a developing economy IT experience and conclude that, even though there are some problems of technical nature and main policy rate is still a weak instrument of transmission channel, the Republic of Moldova chose right time for regime adoption and has made considerable progress towards the...
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Inflation targeting and inflation perceptions: an empirical analysis
Klubíčková, Kateřina ; Horváth, Roman (advisor) ; Janský, Petr (referee)
In this thesis we examine the effect of introduction of inflation targeting as a monetary policy regime on the difference between actual inflation and perceived inflation. Perceived inflation is used in the analysis in contrast with previous research, because inflation perceptions are extracted from consumer surveys conducted in individual European Union countries on the whole population sample and thereby enable us to examine the effect that the introduction of inflation targeting has across the whole population. A panel data set of 19 European Union members and 1 candidate, including 7 inflation targeters, is used in the analysis, with monthly information from the period beginning in January 1990 and ending in December 2012. Based on the analysis using fixed-effects model with specific dummy variables to capture the difference-in-differences element, we find that inflation targeters experience lower differences between actual and perceived inflation and that the difference between actual and perceived inflation decreases after the introduction of inflation targeting. Furthermore, various groups divided according to socio-economic characteristics of the consumer survey respondents tend to be affected in a different way by the introduction of inflation targeting, although to a limited extent. JEL...
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