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The Czech National Bank and Inflation Targeting as an Instrument of Maintaining Price Stability
Pokorný, Tomáš ; Kohajda, Michael (advisor) ; Sejkora, Tomáš (referee)
Title: The Czech National Bank and Inflation Targeting as an Instrument of Maintaining Price Stability Author: Ing. Tomáš Pokorný Supervisor: doc. JUDr. Michael Kohajda Ph.D. When performing monetary policy, the central bank can follow inflation targeting or other monetary policy rules. Following a rule, the central bank can efficiently stabilize economic development in the long run, because the changes in the mon- etary policy given by the policy rule are included in the rational expectations of agents. It might seem that the consistency of monetary policy is secured by following the policy rule only. The potential discretion, however, remains in the different preferences of the bank board members, which may completely change monetary policy decisions within the given monetary policy rule. Current leg- islation does not prevent this discretion by any means as the decision of bank board members' appointment is awarded to the Czech president exclusively, who can completely disrupt the monetary policy consistency with the previous bank board. The changes in the bank board preferences are analyzed using the GMM method on two subsamples in the period of 1996 Q3 - 2021 Q2. The empirical analysis shows that the Czech National Bank followed its constitutional duty and reacted with its policy rates to the...
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Two Essays on Inflation Targeting
Matějů, Jakub ; Horváth, Roman (advisor) ; Holub, Tomáš (referee)
Title: Two Essays on Inflation Targeting Author: Mgr. Jakub Matějů Department: Institute of Economic Studies Supervisor: Roman Horváth, PhD. Abstract: The thesis consists of two essays on inflation targeting. The first essay examines how do monetary authorities set their inflation targets. Survey of central banks' communication regarding the target is presented, theoretical model is developed and finally empirical analysis is conducted on a panel of inflation targeting countries. This pioneering analysis of the topic leads us to conclusion that inflation targets are influenced by more variables than central banks admit. In addition to past and foreign inflation, inflation variability and GDP growth we find significant impact of central bank credibility and other institutional factors. The short second essay surveys literature assessing performance of inflation targeting and outlines perspectives of inflation targeting as a monetary policy framework. The conclusion is that if inflation targeting central banks stick to their best practice in transparency and communication and remain open to innovations, inflation targeting will have a good chance to score well even in the periods of turmoil.
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Inflation Target Setting in Emerging Markets
Orosz, Előd ; Horváth, Roman (advisor) ; Herrmannová, Lenka (referee)
This thesis focuses on emerging market economies which are using inflation targeting as a monetary policy framework. We present an analyses of development of inflation target in emerging market economies and detected its determinants by econometric methods. We used Random Effects Interval Regression, Ordinary Least Squares, Random Effects Generalized Least Squares and Fixed Effects estimator. The thesis contains two main parts. First part surveys theoretical background of inflation targeting focusing on emerging markets. Second part contains an empirical study on inflation targeting. We find out that inflation target in emerging countries is affected by more factors than central banks report. Moreover we found out that price level has an inverse effect on inflation target if we examine just emerging countries, than if we examine whole group of inflation targeting countries.
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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 in emerging market economies
Mašková, Veronika ; Holub, Tomáš (advisor) ; Dědek, Oldřich (referee)
The main objective of the thesis is to analyse the suitability of inflation targeting, a monetary policy regime which focuses on the achievement of the price stability, for the emerging market economies. The performance of inflation targeting countries is compared to the performance of non-inflation targeting countries which use other monetary policies such as the monetary aggregate target or exchange rate anchor. Regressions, using the difference-in-differences estimation approach, are run to assess the contribution of the inflation targeting framework to the development of economic variables such as the CPI, GDP, national interest rate etc. Economic outcomes of the financial crisis period (2007- 2010) are crucial part of the thesis. The convenience of the inflation targeting framework for the emerging market economies is derived. This holds also for the severe situations such as the crisis since it lowers the volatility of the main variables of the interest. Keywords: inflation targeting, monetary economics, monetary policy, emerging market economies, difference in differences estimation, financial crisis
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Two Essays on Inflation Targeting
Matějů, Jakub ; Horváth, Roman (advisor) ; Koprnická, Kamila (referee)
The thesis consists of two essays on inflation targeting. The hrst essay examines how do centrál banks set their inflation targets. Survey of centrál banks' communication regard-ing the target is presented, theoretical model is developed and finally empirical analysis is conducted on a panel of inflation targeting countries. This pioneering analysis of the topič leads us to conclusion that inflation targets are influenced by more variables than centrál banks admit. In addition to past and foreign inflation, inflation variability and GDP growth we find significant impact of centrál bank credibility and other institutional factors. The short second essay surveys literatúre assessing performance of inflation targeting and outlines perspectives of inflation targeting as a monetary policy framework. The conclusion is that if inflation targeting centrál banks stick to their best practice in transparency and communication and remain open to innovations, inflation targeting will háve a good chance to score well even in the periods of turmoil.
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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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Price Level Targeting with Imperfect Rationality: A Heuristic Approach
Molnár, Vojtěch ; Holub, Tomáš (advisor) ; Horváth, Roman (referee)
Price Level Targeting with Imperfect Rationality: A Heuristic Approach Vojtěch Molnár Abstract The thesis compares price level targeting and inflation targeting regimes in a New Keynesian model without rational expectations hypothesis. Economic agents instead form their expectations using heuristics-they choose between a few simple rules based on their past forecasting performance. Two main specifications of the price level targeting model are examined-the agents form expectations either about price level or about inflation, which is ex ante not equivalent because of sequential nature of the model. In addition, several formulations of the forecasting rules are considered. According to the results, price level targeting is preferred in the case with expectations created about price level under the baseline calibration; but it is sensitive to some model parameters. Furthermore, when expectations are created about inflation, price level targeting over time loses credibility and leads to divergence of the economy. On the other hand, inflation targeting model functions stably. Therefore, while potential benefits of price level targeting have been confirmed under certain assumptions, the results suggest that inflation targeting constitutes significantly more robust choice for monetary policy.
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Economic and legal position of the CNB in the environment of inflation and deflation
Husník, Karel ; Bažantová, Ilona (advisor) ; Dupáková, Lenka (referee)
Karel Husník: Economic and Legal Position of the Czech National Bank in the Environment of Inflation and Deflation The aim of this thesis is to analyse the position of the Czech National Bank (CNB) from the legal and economic point of view and to analyse the monetary policy instruments which the central bank can use efficiently in inflation targeting. The primary criterium is macroeconomic environment of inflation, respectively deflation. The thesis newly divides the monetary policy instruments on conventional and non-conventional. The thesis uses multidisciplinary approach, it combines economic and legal point of view. The methodology of this thesis is analysis, description in historical projection and comparation. The laws of the Czech Republic and the documents of CNB, which are available online, are used. Author also worked with data from the Czech Statistical Office and with various economic studies and papers. The first chapter of the thesis analyses position of independent Czech National Bank in its constitutional and lawful position. The Law of the Czech National Bank and the Constitution of the Czech Republic defines the purpose of the CNB and her relationship with other components of state power. The CNB's monetary policy objective is set forth in Article 98 of the Constitution of the...
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A BVAR Model for Forecasting of Czech Inflation
Brázdik, František ; Franta, Michal
Bayesian vector autoregressions (BVAR) have turned out to be useful for medium-term macroeconomic forecasting. Several features of the Czech economy strengthen the rationale for using this approach. These include in particular the short time series available and uncertainty about long-run trends. We compare forecasts based on a small-scale mean-adjusted BVAR with the official forecasts published by the Czech National Bank (CNB) over the period 2008q3–2016q4. The comparison demonstrates that the BVAR approach can provide more precise inflation forecasts over the monetary policy horizon. For other macroeconomic variables, the CNB forecasts either outperform or are comparable with the forecasts based on the BVAR model.
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