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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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Dynamics of Linear Forward-looking Structural Macroeconomic Models at the Zero Lower Bound: Do Solution Techniques Matter?
Brůha, Jan
Yes, they do matter, sometimes a lot. In this paper, I compare various solution techniques that can be used to solve structural forward-looking macroeconomic models subject to the zero lower bound as the only non-linearity. I use stylized forward-looking models to compare the solution techniques based on impulse responses, on the implications of forward guidance, on the values of fiscal multipliers, and on solution accuracy. I disprove recent claims in the literature that various solution methods yield identical dynamics. The solutions are equivalent only if the zero lower bound constraint binds for no more than one period, otherwise the implied dynamics can be different. Moreover, I find that large effects of forward guidance and large fiscal multipliers at the zero lower bound are found especially when models are solved using ‘shadow’ shocks. On the other hand, the occasional-binding toolbox and solutions based on a non-linear deterministic solver imply small effects of forward guidance and fiscal multipliers that are not significantly larger at the zero lower bound than during normal times. Moreover, these two types of solutions seem to be the most accurate.
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Unconventional monetary policy after the collapse of Lehman Brothers
Dragoun, Josef ; Brůna, Karel (advisor) ; Dvořák, Michal (referee)
This diploma thesis is focused on unconventional monetary policy tools that individual central banks introduced into practise as a response to the global financial crisis. It is about quantitative easing policy, foreign exchange interventions with exchange rate commitment and negative interest rates. This thesis also deals with classical tools of monetary policy such as open market operations, discount tools, minimum requirement reserve or foreign exchange interventions. The aim of the thesis is to document the development of central banks policy and then to examine relationship of selected assets in comparison with balance sheet of Federal reserve systems with help of correlation coefficient. The thesis also deals with the thought how should behave in the zero lower bound environment and what are the pitfalls of unconventional monetary policy.
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Quantitative easing - A Policy of Interest Rates Close to Zero
Celer, Martin ; Potužák, Pavel (advisor) ; Slaný, Martin (referee)
This diploma thesis describes the Quantitative easing as an unconvetional tool of the monetary policy. In the first chapter of this thesis there is theoretical analysis of the zero lower bound and also of specific phenomenon that might occur in this situation (the liquidity trap). The second chapter deals with the quantitative easing as a monetary policy with focus on the United States. It summarizes its development during three so called rounds, during which the quantitative easing has been used. This chapter also contains analysis of the entrance and exit strategy of the quantitative easing. In the third chapter, there is an econometric model estimated by ordinary least squares method with robust errors. This model is being used to verify the hypothesis whether the quantitative easing lowered long-term interest rates. The hypothesis has been rejected as the quantitative easing does not have statistically significant effect on any selected long-term bonds.
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Myths and Realities of Negative Interest Rates
Strach, Jakub ; Jakl, Jakub (advisor) ; Kučera, Lukáš (referee)
This bachelor's thesis examines the issue of negative interest rates with focus on its application within monetary policy. The theoretical part describes important interest rates and their interlinkages. Further it addresses the Taylor rule that often figures as an argument for their implementation. The last chapter mentions breakthrough theoretical opinions on the issue of negative nominal interest rates. The analytical part of the thesis focuses on the situations that would gain from the usage of negative interest rates. It deals with the problem of zero lower bound that hinders said usage and three main proposals how to deal with this problem. Following chapter describes the events of the past years particularly in Europe when the negative interest rates were used by central banks of Switzerland, Denmark and ECB. The closing chapters explain dangerous trends in the conditions of long lasting negative interest rates and obstacles in the legislation.
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Abenomics: Vstříc světlejším zítřkům, nebo stále to samé?
Pinta, Ondřej ; Potužák, Pavel (advisor) ; Špecián, Petr (referee)
This thesis investigates the impact of Abenomics policies, named after the new Japanese Prime Minister Shinzo Abe, on the economy. His so-called "three arrows" agenda includes fiscal expansion, quantitative and qualitative monetary easing, and regulatory reforms. This work focuses on the assessment of the fulfillment of set goals and compares Abenomics to previous policies. Abe's cabinet succeeded in raising inflation and depreciating yen. The debt growth has almost halted and the GDP has mildly recovered. However, the economy is still far from stable. This thesis also explores further issues encountered by the Japanese economy such as the shut-down of nuclear power plants and effects of the zero lower bound constraint. This work introduces a synthetic counterfactual to assess the real results of Abenomics. This method builds a model of an alternate Japan, in which Abe had not assumed the office. The results suggest that the impact of Abenomics on the GDP per capita is slightly positive or negligible.
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Inflation targeting in case of imminent deflationary pressures - the example of CNB
Plachý, Matěj ; Koderová, Jitka (advisor) ; Dvořák, Michal (referee)
This diploma thesis focuses on the use of inflation targeting as monetary policy regime in a situation of imminent deflation. The thesis is divided into three main parts. The first part introduces the basic mechanism of inflation targeting with its basic elements and describes its possible failure. The second part focuses mainly on the analysis of the economic factors which contributed to achieving the zero lower bound for the repo rate of CNB. The third part presents an alternative (unconventional) monetary policy instruments in case of achieving zero lower bound, in particular the use of the exchange rate. The end of the last part of this thesis analyzes the development of key macroeconomic indicators in the Czech Republic.
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Monetary policy of CNB in zero lower bound
Bohatec, Martin ; Ševčíková, Michaela (advisor) ; Pfeifer, Lukáš (referee)
This thesis deals with CNB interventions in favor of the exchange rate depreciation of November 2013. The theoretical part presents alternative tools for unconventional monetary policy when zero lower bound is binding. This thesis then describes the experience of other central banks that responded to low interest rates. Intervention of CNB is contextualized in the Czech financial system and previous economic development. The thesis analyses alternative instruments which CNB might have accessed. Based on the analyzed data this thesis concludes that despite the long-term maintenance of weakened Koruna above the level of announced exchange rate pledge the sufficiently loose monetary policy was not translated into desired price increase.
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CNB Monetary Intervention in Global Context
Bejdová, Markéta ; Potužák, Pavel (advisor) ; Janíčko, Martin (referee)
This diploma thesis describes the intervention of the Czech National Bank in November 2013 in terms of current economic theory and practice as well as its justification. In the first theoretical part is presented actual literature dealing with the zero lower bound (ZLB). This part is divided to general description of ZLB, its prevention and possibilities of monetary policy. Further are described experiences from Japan and other countries which achieved ZLB. In this context is also presented intervention made by the Czech National Bank. Hypothesis whether the intervention was justified is tested by linear and nonlinear Taylor rule. Estimate is made by the least squares method using quarterly data from the CSO and CNB. The results of model confirm the hypothesis, which means that the optimal monetary policy interest rate would fall below zero.
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