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Helicopter Money and the Propensity to Consume Transfers: The Case of Czech Republic
Doležal, Jakub ; Havránek, Tomáš (advisor) ; Hanzlík, Petr (referee)
Jakub Doležal1 1 ) Institute of Economic Studies, Faculty of Social Sciences, Charles University 50735965@fsv.cuni.cz The thesis discusses the topic of helicopter money - unconventional mon- etary policy aimed at increasing sub-target inflation and reviving GDP growth when the orthodox monetary policy is constrained by the zero lower bound (ZLB) on policy rates. From the perspective of the households, helicopter money transfer is a windfall gain. Part of the transfer - marginal propensity to con- sume (MPC) - is within weeks turned into consumption. MPC directly affects the outcomes of the policy, it is therefore advisable to predict it. The first part of the thesis describes unconventional monetary with special emphasis on helicopter money, quantitative easing and debt monetization. The second part is then devoted to identifying country-level drivers of MPC and subsequently predicting average MPC across Czech households using meta-analytic approach. While controlling for publication bias and performing variables selection through Least Absolute Shrinkage and Selection Operator (lasso) the model predicts av- erage marginal propensity to consume the transfer ranging from 0.46 to 0.51 during the years of sub-target inflation and under ZLB on policy rates within the Czech economy.
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How Can the Czech National Bank Eliminate the Zero Lower Bound on Interest Rates? A Case Study
Katinová, Alexandra ; Havránek, Tomáš (advisor) ; Kolcunová, Dominika (referee)
The thesis provides case study research on the feasibility of the negative in- terest rate policy in the context of the Czech Republic. No major obstacles opposing the policy itself were found in the bases of the Czech legal system, however, a list of acts explicitly affected by the value of policy rates needs to be adjusted to prevent misinterpretations. Moreover, it was identified that tax prepayments held by the Tax Authority and free reserves kept at the Czech National Bank at zero interest rate create room for escaping from the policy. Additionally, debt repayments in cash and interest-free accounts of government and public institutions administrated by the Czech National Bank could lead to undesirable advantages. A complementary VAR model analysis of the interest rate transmission under negative policy rates was performed to evaluate quan- titatively the experience from European countries, however, short data series available provided merely indicative results.
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The Effectiveness of the Federal Reserve's Monetary Policy under the Zero Lower Bound
Petrásek, Lukáš ; Horváth, Roman (advisor) ; Šopov, Boril (referee)
This thesis investigates the effectiveness of Federal Reserve's monetary policy under the zero lower bound. It estimates the impacts on interest rates due to surprising components of macroeconomic news. To obtain those surprise components, data on the actual and expected announced values of those news are used. The results support the findings in existing literature that the shorter- term interest rates were constrained by the zero lower bound, but the longer- term interest rates remained unconstrained. The conclusion is that to the extend that the Fed is able to affect those longer-term yields, its monetary policy effectiveness was essentially unaffected by the presence of the zero lower bound. JEL Classification E43, E52, E58 Keywords monetary policy, zero lower bound, interest rates, macroeconomic news Author's e-mail lukas.petrasek1.1@gmail.com Supervisor's e-mail roman.horvath@fsv.cuni.cz
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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 Czech exchange rate floor: Depreciation without inflation?
Baxa, Jaromír ; Šestořád, Tomáš
After the introduction of an exchange rate commitment and an immediate 7% depreciation of the Czech koruna of in 2013, output growth resumed but inflation remained low. Consequently, the Czech National Bank did not return policy to normal for more than three years. Using a time-varying parameter VAR model with stochastic volatility, we show that this was not surprising. The exchange rate pass-through to prices had been rather low and gradually decreasing since the early 2000s, suggesting limited potential effects of the exchange rate commitment on inflation. On the other hand, the pass-through to output growth increased. These results hold even when the period of the exchange rate floor and the zero lower bound is excluded from the sample, and they are robust to other sensitivity checks. Our results are consistent either with a flattened Phillips curve, or rising quality of the Czech exports and participation in global value chains, or a small effect of the exchange rate commitment on inflation expectations when not paired with temporary price-level targeting. Moreover, we highlight the usefulness of models accounting for time variation of parameters for policy analysis.
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Estimating the effective lower bound for the Czech National Bank’s policy rate
Kolcunová, Dominika ; Havránek, Tomáš
This paper focuses on the estimation of the effective lower bound on the Czech National Bank’s policy rate. The effective lower bound is determined by the value below which holding and using cash would be preferable to holding deposits with negative yields. This bound is approximated on the basis of the storage, insurance and transport costs of cash and the loss of convenience associated with cashless payments. This estimate is complemented by a calculation based on interest charges reflecting the impact of negative rates on banks’ profitability. Overall, we get a mean of slightly below –1%, approximately in the interval (–2.0%, –0.4%). In addition, by means of a vector autoregression we show that the potential of negative rates is not sufficient to deliver monetary policy easing similar in its effects to the impact of the Czech National Bank’s exchange rate commitment during the years 2013–2017.
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Topics in central banking
Brož, Václav ; Kočenda, Evžen (advisor) ; Tůma, Zdeněk (referee) ; Égert, Balázs (referee) ; Martin, Reiner (referee)
This dissertation consists of three research papers dealing with selected issues relevant for central banks after the global financial crisis. The post-crisis world has seen a significant strengthening of the role of central banks with regard to the financial system as well as the real economy. Correspondingly, agendas of some central bankers have grown substantially, encompassing among others monetary policy, financial stability (macro- and microprudential policies) as well as resolution mechanisms. This dissertation thesis reflects the broad focus of some contemporary central banks in three original research articles that concern current unexplored issues for monetary policy and financial stability in the European Union, the Czech Republic, and the United States, potentially bringing policy implications for the relevant authorities. The first article analyzes inflation convergence in the whole European Union (EU) over 1999-2017 and provides comprehensive and robust evidence that the process of inflation convergence among the countries of the EU was not permanently disrupted during the global financial crisis, the European sovereign debt crisis, or the period of zero lower bound interest rates. Specifically, the convergence process did not noticeably weaken after the crisis and the occurrence of...
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How Can the Czech National Bank Eliminate the Zero Lower Bound on Interest Rates? A Case Study
Katinová, Alexandra ; Havránek, Tomáš (advisor) ; Kolcunová, Dominika (referee)
The thesis provides case study research on the feasibility of the negative in- terest rate policy in the context of the Czech Republic. No major obstacles opposing the policy itself were found in the bases of the Czech legal system, however, a list of acts explicitly affected by the value of policy rates needs to be adjusted to prevent misinterpretations. Moreover, it was identified that tax prepayments held by the Tax Authority and free reserves kept at the Czech National Bank at zero interest rate create room for escaping from the policy. Additionally, debt repayments in cash and interest-free accounts of government and public institutions administrated by the Czech National Bank could lead to undesirable advantages. A complementary VAR model analysis of the interest rate transmission under negative policy rates was performed to evaluate quan- titatively the experience from European countries, however, short data series available provided merely indicative results.
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The Effectiveness of the Federal Reserve's Monetary Policy under the Zero Lower Bound
Petrásek, Lukáš ; Horváth, Roman (advisor) ; Šopov, Boril (referee)
This thesis investigates the effectiveness of Federal Reserve's monetary policy under the zero lower bound. It estimates the impacts on interest rates due to surprising components of macroeconomic news. To obtain those surprise components, data on the actual and expected announced values of those news are used. The results support the findings in existing literature that the shorter- term interest rates were constrained by the zero lower bound, but the longer- term interest rates remained unconstrained. The conclusion is that to the extend that the Fed is able to affect those longer-term yields, its monetary policy effectiveness was essentially unaffected by the presence of the zero lower bound. JEL Classification E43, E52, E58 Keywords monetary policy, zero lower bound, interest rates, macroeconomic news Author's e-mail lukas.petrasek1.1@gmail.com Supervisor's e-mail roman.horvath@fsv.cuni.cz
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Consumption, price expectations and deflatively-recessive spiral
Plný, Petr ; Mandel, Martin (advisor) ; Tran, Van Quang (referee)
This thesis examines the relationship between price expectations and current consumption. Especially, whether the postponement of final consumption expenditure by households, as a result of their declining price expectations; which may be a deflatively-recessive spiral starter; coincides with economic theory and practice. Based on this, appropriate economic policy recommendations can be drawn. The analysis in the framework of intertemporal consumer model of two periods extended by inflation and the risk confirms this hypothesis. Price expectations positively affect current consumption through the intertemporal substitution effect of real interest rate changes. However, certain assumptions must be fulfilled. Especially, the economy must be in a fixed nominal interest rate environment, the substitution effect must not be offset by the effect of a change in the expected real disposable income or the income effect of the change in the real interest rate and the households must have a higher disposable income so that they can afford to postpone consumption. These findings coincide with the conclusions of the empirical analyzes mentioned in this thesis.
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