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ECB Monetary Policy: "One Size Doesn't Fit All" Problem and Its Impact on Credits Volume
Nedvěd, Petr ; Baxa, Jaromír (advisor) ; Novák, Jiří (referee)
In this work, I analyse inappropriateness of single monetary policy in the euro area and its impact on credit growth for the oldest twelve euro members and a time period spanning 1999Q1-2013Q3. The inappropriateness is expressed by deviations of actual interest rate from Taylor rule prescriptions. The obtained results are in line with a majority of existing literature since they show that the ECB's single interest rate was the least suitable for the so called PIIGS countries prior to the recent economic crisis. The impact of the deviations on credit growth is estimated econometrically by dynamic panel data estimation. The findings confirm my hypothesis that the deviations from the Taylor rule have a significant positive effect on credits volume, i.e. the higher is the Taylor rule prescription above the actual rate, the higher is the credit growth.
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Estimating implicit inflation target of the ECB
Melioris, Libor ; Horváth, Roman (advisor) ; Geršl, Adam (referee)
Existing estimations of implicit inflation target are primarily based on the assumption of parameter stability over time horizon. This work relaxes this assumption and proposes alternative framework based on time-varying parameter model. We aim on behaviour of European Central Bank in order to compare its official proclamations of price stability levels with our implicit estimations. We will also examine how two pillar strategy of European Central Bank is practically used.
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Essays on Monetary Policy
Žáček, Jan ; Holub, Tomáš (advisor) ; Horváth, Roman (referee) ; Tillmann, Peter (referee) ; Bulíř, Aleš (referee)
CHARLES UNIVERSITY FACULTY OF SOCIAL SCIENCES Institute of Economic Studies Essays on monetary policy Abstract Author: Mgr. Jan Žáček Advisor: doc. Mgr. Tomáš Holub, Ph.D. Academic year: 2020/2021 Abstract The dissertation thesis consists of three research papers in the field of mone- tary policy. All three papers connect the same topic - monetary policy rules. The first two papers focus on monetary policy rules augmented with finan- cial variables from a theoretical point of view, while the third paper provides international empirical evidence on the monetary policy conduct taking into account financial cycle developments. In the first paper I employ a small-open economy dynamic stochastic gen- eral equilibrium (DSGE) model to examine whether the central bank's direct reaction to asset prices or credit-to-GDP ratio brings macroeconomic benefits in terms of lower volatility of inflation and output. I find that direct reaction to asset prices can be beneficial for a central bank; however, the result holds only for some domestic shocks. When facing shocks originating abroad, the usefulness of the augmented monetary policy rule deteriorates. Overall, the performance of the rule augmented with asset prices is shock-dependent, and therefore, any strict rule-like behaviour for a central bank operating within a...
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ECB Monetary Policy: "One Size Doesn't Fit All" Problem and Its Impact on Credits Volume
Nedvěd, Petr ; Baxa, Jaromír (advisor) ; Novák, Jiří (referee)
In this work, I analyse inappropriateness of single monetary policy in the euro area and its impact on credit growth for the oldest twelve euro members and a time period spanning 1999Q1-2013Q3. The inappropriateness is expressed by deviations of actual interest rate from Taylor rule prescriptions. The obtained results are in line with a majority of existing literature since they show that the ECB's single interest rate was the least suitable for the so called PIIGS countries prior to the recent economic crisis. The impact of the deviations on credit growth is estimated econometrically by dynamic panel data estimation. The findings confirm my hypothesis that the deviations from the Taylor rule have a significant positive effect on credits volume, i.e. the higher is the Taylor rule prescription above the actual rate, the higher is the credit growth.
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Estimating implicit inflation target of the ECB
Melioris, Libor ; Horváth, Roman (advisor) ; Geršl, Adam (referee)
Existing estimations of implicit inflation target are primarily based on the assumption of parameter stability over time horizon. This work relaxes this assumption and proposes alternative framework based on time-varying parameter model. We aim on behaviour of European Central Bank in order to compare its official proclamations of price stability levels with our implicit estimations. We will also examine how two pillar strategy of European Central Bank is practically used.
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An empirical estimate of the pre-crisis Taylor rule of the Fed using real-time data
Mrázek, Martin ; Potužák, Pavel (advisor) ; Kadeřábková, Božena (referee)
This thesis analyses the monetary policy of the Fed in the period before the financial and economic crisis 2007. The aim of this analysis is to investigate whether the monetary policy significantly deviated from the preceding one which, according to John Taylor, adhered to the Taylor rule. This analysis is performed using both revised and real-time data. I compare the monetary policy with various specifications of the Taylor rule. I also estimate a forward-looking Taylor rule. The results confirm the deviation from the Taylor rule. However, deviations were usual in the whole sample period. Estimated models do not indicate that the monetary policy before the crisis was different from the rest of the analyzed period.
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Real-time versus revised data in estimating the Taylor rule for the Czech Republic
Beňo, David ; Potužák, Pavel (advisor) ; Slaný, Martin (referee)
The main task of this paper is to analyze the differences between estimates of Taylor rule in real-time and with revised data. Estimates of the Taylor rule for the Czech Republic are compared. The source of data is OECD real-time database. The analysis shows that the estimates in real-time and ex-post vary significantly. The average deviation is equal to 0.9 percentage points. The main cause is the estimation of the output gap in real-time. Parameters of estimated reaction function also depend on the type of used data. The rule of inflation targeting or natural growth is more suitable for the use in real-time.
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Macroeconometric Model of Monetary Policy
Čížek, Ondřej ; Pánková, Václava (advisor) ; Kodera, Jan (referee) ; Lukáš, Ladislav (referee)
First of all, general principals of contemporary macroeconometric models are described in this dissertation together with a brief sketch of alternative approaches. Consequently, the macroeconomic model of a monetary policy is formulated in order to describe fundamental relationships between real and nominal economy. The model originated from a linear one by making some of the parameters endogenous. Despite this nonlinearity, I expressed my model in a state space form with time-varying coefficients, which can be solved by a standard Kalman filter. Using outcomes of this algorithm, likelihood function was then calculated and maximized in order to obtain estimates of the parameters. The theory of identifiability of a parametric structure is also described. Finally, the presented theory is applied on the formulated model of the euro area. In this model, the European Central Bank was assumed to behave according to the Taylor rule. The econometric estimation, however, showed that this common assumption in macroeconomic modeling is not adequate in this case. The results from econometric estimation and analysis of identifiability also indicated that the interest rate policy of the European Central Bank has only a very limited effect on real economic activity of the European Union. Both results are influential, as monetary policy in the last two decades has been modeled as interest rate policy with the Taylor rule in most macroeconometric models.
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Česká swapová křivka, ekonomické fundamenty a finanční trhy
Pohl, Martin ; Málek, Jiří (advisor) ; Kodera, Jan (referee) ; Lukáš, Ladislav (referee)
We focus on Czech swap market in a broader context of economic and financial development and we provide extensive empirical evidence that swaps have many features of a "risk-free" asset. They are traded with sufficient liquidity and low transaction costs that make them attractive for investors. Swap curve dynamics may be decomposed into level, slope and curvature parameters known from bond markets.Level and slope parameter may be interpreted by Taylor rule like functions in terms of output gap and inflation. Level reflects mainly inflation expectations and its sensitivity to output gap is small. Slope parameter is highly sensitive to business cycle fluctuations and inflation deviation from CNB's target. Domestic monetary policy remains an important determinant of swap curve parameters with gradual market reaction. Czech swap rates are closely connected to Euro swap rates. We found level factors to be cointegrated and also slope and curvature exhibit strong sensitivity to Euro rates. Financial variables don't seem to have large impact on swap rates with the exemption of global equity markets, where we found positive correlation between level and SP500 returns. In contrast, Czech government bonds have many features historically connected to corporate bonds such as positive correlation with risky assets and business cycle fluctuations. Government bonds also showed large volatility and rising risk premia in the 2008/2009 financial crisis. Finally, we estimated forward premium and we found large and rising premium and limited support for expectation theory.
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Consequences application uniform policy of ECB on euro area countries
Skrbek, Ondřej ; Babin, Jan (advisor) ; Mirvald, Michal (referee)
The main goal of the bachelory thesis is to verify impact of common monetary policy of European central bank with motto "one size fits all" on the credit growth in the Euro area. It means uniform settings of interest rate EONIA, which values I compare with country-specific policy rate based on Taylor rule. Panel data are included in the range of 2005-2011 for 4 countries with different economic maturity: France, Germany, Ireland and Spain. Using the OLS estimation I can confirm negative effect. It means, that lower interest rate, then the country-specific one, is pressing on the credit growth of countries in euro area and thereby negatively affects the economy of the state.
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