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The Exchange Rate Pass-Through at the Zero Lower Bound: The Evidence from the Czech Republic
Šestořád, Tomáš ; Baxa, Jaromír (advisor) ; Novák, Jiří (referee)
The paper examines the hypothesis that the devaluation of the domestic currency leads to the higher exchange rate pass-through at the zero lower bound since the interest rate channel cannot offset effects of the depreciation in that situation. Time-varying vector autoregression with stochastic volatility is used to identify the development of the pass-through. The hypothesis is tested on the Czech dataset because the Czech Republic is considered as the prototypical small open economy with inflation targeting. The assumption of higher pass-through to consumer prices at the zero lower bound is rejected. Obtained results confirm that the deprecation stimulates output growth slightly more when the interest rate is close to zero. Our estimations imply that the exchange rate commitment of the Czech National Bank increased the price level by 0.116 % and contributed to the output growth by 0.781 %.
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Inflation Convergence in the European Union: the effect of monetary regimes, the global financial crisis and the zero lower bound
Brož, Václav ; Kočenda, Evžen (advisor) ; Holub, Tomáš (referee)
Synchronizace inflačních cyklů je jednou z podmínek teorie optimální měnové unie, a jelikož bude jednoho dne valná většina členských států EU používat euro, zdá se analýza konvergence jejich inflačních měr jako rozumná i z dnešního pohledu. Používáme data měřítka harmonizovaného indexu spotřebitelských cen, jakož i velmi flexibilní model zdánlivě nesouvisejících regresních modelů a podáváme důkaz o všeobecně rozšířeném, setrvalém a robustním výskytu konvergence inflace v celé EU mezi lety 1999 a 2016. Navíc nám naše metodologie umožňuje zahrnout do modelu řadu dummy proměnných indikujících konkrétní období s možným dopadem na konvergenci inflace. V tomto smyslu ukazujeme, že měnové režimy zaměřené na cenovou stabilitu (inflační cílování, opatření omezující pohyb měnového kurzu) mají příznivý dopad, období globální finanční krize a nulové dolní meze se obecně nejeví jako rušivé, zatímco efekt zavádění společného evropského práva zůstává nejistý. Naše hlavní závěry implikují, že synchronizace inflace zřejmě nepředstavuje problém pro další rozšíření Eurozóny.
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Negative Interest Rates - How Far Can They Go?
Ján, Jan ; Holub, Tomáš (advisor) ; Jašová, Martina (referee)
Bachelor thesis is focused on one of the most topical themes in the field of a monetary policy, the negative interest rates. Until recent times the effective lower bound of interest rates imposed by central banks was thought to be the strict null but macroeconomic conditions of certain European countries or Japan made policy makers start to experiment with the unexplored tool of a monetary policy. They broke the zero lower bound and employed the negative interest rates. Since it seems that the effective lower bound would not be zero but it is situated in the negative territory probably - and the thesis tries to find such a value. The discussion starts at the beginning of the twentieth century with the well-known economist Silvio Gesell, then continues to present and gives a view of the countries, which have already implemented negative interest rates in some form. Additionally, the thesis is focused on the issue concerning an increase in risks presented by the financial markets arising from this monetary policy. Last but not least, it takes into account the problem of the substitution from electronic money to cash, how this constraint can be overcome and on what level of negative interest rates this could take place.
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Global Spillover Effects from Unconventional Monetary Policy During the Crisis
Solís González, Brenda ; Baxa, Jaromír (advisor) ; Mertlík, Pavel (referee)
This work investigates the international spillover effects and transmission channels of Unconventional Monetary Policy (UMP) of major central banks from United States, United Kingdom, Japan and Europe to Latin-American countries. A Global VAR model is estimated to analyze the impact on output, inflation, credit, equity prices and money growth on the selected countries. Results suggest that indeed, there are international spillovers to the region with money growth, stock prices and international reserves as the main transmission channels. In addition, outcomes are different between countries and variables implying not only that transmission channels are not same across the region but also that the effects of the monetary policy are not distributed equally. Furthermore, it is found evidence that for some countries transmission channels may have transformed due to the crisis. Finally, effects of UMP during the crisis were in general positive with exception of Japan indicating that policies from this country brought more costs than benefits to the region. Keywords Zero Lower Bound, Unconventional Monetary Policy, International Spillovers, Global VAR, GVAR.
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Monetary policy approaches at the ZLB to solve post-crisis situation and their effectiveness
Hummelová, Magdalena ; Hlaváček, Michal (advisor) ; Ryska, Pavel (referee)
Monetary policy approaches at the ZLB to solve post-crisis situation and their effectiveness Magdalena Hummelová May 10, 2016 Abstract This thesis describes monetary policy tools implemented by central banks whose main monetary policy rates at some point after 2008 global economic crisis hit the zero lower bound. Central banks considered in this study are the Fed, the ECB, the SNB and the CNB. A smaller ef- fectiveness analysis of the macroeconomic effects using a simple vector autoregressive (VAR) model is provided as well. The model is inspired by similar study of Gambacorta et al. (2012). With the use of monthly data over the sample period, the VAR tries to quantify the impact an increase in a central bank's balance sheet has on the main economic indicators- real output, consumer prices and implied volatility indices in the financial markets. Some of the results are comparable to those of the reference study mentioned above. This applies to the output results in a sense that the balance sheet shock has a slightly significant temporary effect on it. On the contrary, responses of the implied volatility indices and prices are less significant (or insignificant) and not at all comparable with the reference study. With some exceptions, there are no major discrepancies between individual country results in spite of...
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Helicopter Drop of Money - Is It Feasible in Practice?
Gábrišová, Nela ; Holub, Tomáš (advisor) ; Adam, Tomáš (referee)
The main goal of this thesis is to discuss the famous Milton Friedman's concept of Helicopter Drop of Money in context of its applicability in the real world as a possible solution to liquidity trap. For better understanding, the thesis briefly de- scribes conduct of traditional and unconventional monetary policies. Key focus is put on describing assumptions necessary for the concept to yield desirable economic outcomes, and on detailed analysis of periods when zero lower bound on nominal interest rates is binding. Furthermore, roles of agents involved in execution of the concept, and important channels of transmission process are discussed from idealised theoretical view to real world possibilities of feasible execution. Additionally, prac- tical experience with direct cash distribution in Australia, and with quantitative easing programmes in Japan and the USA are explained. The last part analyses effects of increased monetary base on CPI inflation, money multiplier M2, and GDP in Japan and the USA using vector autoregression. JEL Classificiation E31, E43, E51, E52 Keywords Helicopter drop of money, quantitative easing, monetary base, liquidity trap, zero lower bound Author's email nela.gabrisova@gmail.com Supervisor's email tomas.holub@cnb.cz
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The Effectiveness of Unconventional Monetary Policy Tools at the Zero Lower Bound: A DSGE Approach
Malovaná, Simona ; Holub, Tomáš (advisor) ; Franče, Václav (referee)
The central bank is not able to further ease monetary conditions once it ex- hausts the space for managing short-term policy rate. Then it has to turn its attention to unconventional measures. The thesis provides a discussion about the suitability of different unconventional policy tools in the Czech situation while the foreign exchange (FX) interventions have proven to be the most appropriate choice. A New Keynesian small open economy DSGE model estimated for the Czech Republic is enhanced to model the FX interventions and to compare dif- ferent monetary policy rules at the zero lower bound (ZLB). The thesis provides three main findings. First, the volatility of the real and nominal macroeconomic variables is magnified in the response to the domestic demand shock, the for- eign financial shock and the foreign inflation shock. Second, the volatility of prices decreases significantly if the central bank adopts price-level or exchange rate targeting rule. Third, intervening to fix the nominal exchange rate on some particular target or to correct a misalignment of the real exchange rate from its fundamentals serves as a good stabilizer of prices while intervening to smooth the nominal exchange rate movements increases the overall macroeconomic volatility at the ZLB. 1
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Efektivnost monetární politiky při nulových sazbách
Mandok, Denis ; Jílek, Josef (advisor) ; Munzi, Tomáš (referee)
This thesis explores efficiency of monetary policy under zero lower bound condition. At first, is defined a role of monetary policy and criteria to judge the effectiveness of monetary policy are introduced. Then reactions of central banks of USA, Japan and Euro zone are explored. Thesis found out that monetary policy can be effective under a condition of zero lower bound. As last is introduced idea how to improve current monetary regime.
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Optimal Monetary and Fiscal Policy at Zero Lower Bound
Šestořád, Tomáš ; Potužák, Pavel (advisor) ; Kadeřábková, Božena (referee)
This thesis concerns the interaction of monetary and fiscal policy. Using New Keynesian model, we show the impact of fiscal expansion under different specifications of monetary policy rules. The analysis of the transmission of fiscal expansion focuses on the situation in which central bank's nominal interest rate reaches zero lower bound. We verify the economic model using vector autoregression based on data of the United States. The results of the theoretical and empirical research suggest that the influence of government spending on the product is greater at the zero lower bound.
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