Advanced Search
MyIDEAS: Login to save this article or follow this journal

Determinants of Long-term Interest Rates in the Czech Republic

Contents:

Author Info

  • Tomáš Holinka

    ()
    (Czech National Bank, Prague)

Registered author(s):

    Abstract

    The paper analyses the factors leading to the fall of long-term interest rates in the Czech Republic – respectively, the long-term interest rate differential in the Czech Republic and the Eurozone – between 1998 and 2003. The selection of factors is determined by the Fisher equation, UIP, PPP, expectation hypothesis and neoclassical growth theory. The paper suggests that falling long-term interest rates may have been affected by an expectation of lower short-term rates due to falling inflation expectations and inflation premiums. The decrease of CZK/EUR long-term rate differentials from 4 % to 0 % can approximately be explained by the one-third decrease of inflation expectations in the Czech Republic and by the 50% decrease of the relative inflation premium. In the long term, the effect of Czech National Bank monetary policy is dwindling vis-à-vis European Central Bank policy, i.e., euro interest rates. Another factor is the anticipated entry of the Czech Republic into the Economic Monetary Union. The real interest-rate differential has no effect.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://journal.fsv.cuni.cz/storage/1027_s_363_379.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

    Volume (Year): 55 (2005)
    Issue (Month): 7-8 (July)
    Pages: 363-379

    as in new window
    Handle: RePEc:fau:fauart:v:55:y:2005:i:7-8:p:363-379

    Contact details of provider:
    Postal: Opletalova 26, CZ-110 00 Prague
    Phone: +420 2 222112330
    Fax: +420 2 22112304
    Email:
    Web page: http://ies.fsv.cuni.cz/
    More information through EDIRC

    Related research

    Keywords: long-term interest rates; expectation hypothesis; UIP; PPP; growth theory; inflation expectations; premium;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:fau:fauart:v:55:y:2005:i:7-8:p:363-379. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lenka Herrmannova).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.