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Asymmetric Monetary Policy in the Czech Republic?

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Abstract

This paper analyses the hypothesis of whether asymmetric monetary policy could have contributed to the undershooting of the inflation targets of the Czech National Bank in the years 1998–2007. To this end, a non-linear Taylor Rule is estimated. The results indicate that from 1998 to about 2002, the Czech National Bank responded more aggressively to forecasts of inflation exceeding the target than to those below the target. There is, however, no evidence for asymmetric monetary policy in estimates of the monetary policy rule derived from more recent data. This suggests that symmetric handling of the inflation targets prevailed in the past several years.

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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): 58 (2008)
Issue (Month): 09-10 (December)
Pages: 470-481

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Handle: RePEc:fau:fauart:v:58:y:2008:i:9-10:p:470-481

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Keywords: monetary policy; inflation targeting; undershooting;

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References

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  1. J. J. Dolado & R. Maria-Dolores & F. J. Ruge-Murcia, 2002. "Nonlinear Monetary Policy Rules: Some New Evidence For The Us," Economics Working Papers we022910, Universidad Carlos III, Departamento de Economía.
  2. Glenn D. Rudebusch, 2005. "Monetary policy inertia: fact or fiction?," Working Paper Series 2005-19, Federal Reserve Bank of San Francisco.
  3. Podpiera, Jirí, 2008. "The role of ad hoc factors in policy rate settings," Economic Modelling, Elsevier, vol. 25(5), pages 1003-1010, September.
  4. Kenneth Petersen, 2007. "Does the Federal Reserve Follow a Non-Linear Taylor Rule?," Working papers 2007-37, University of Connecticut, Department of Economics.
  5. Surico, Paolo, 2007. "The Fed's monetary policy rule and U.S. inflation: The case of asymmetric preferences," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 305-324, January.
  6. Bec Frédérique & Ben Salem Mélika & Collard Fabrice, 2002. "Asymmetries in Monetary Policy Reaction Function: Evidence for U.S. French and German Central Banks," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 6(2), pages 1-22, July.
  7. Katerina Smidkova, 2003. "Targeting Inflation under Uncertainty: Policy Makers' Perspective," Research and Policy Notes 2003/02, Czech National Bank, Research Department.
  8. Ramalho Joaquim J.S., 2005. "Small Sample Bias of Alternative Estimation Methods for Moment Condition Models: Monte Carlo Evidence for Covariance Structures," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(1), pages 1-20, March.
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Cited by:
  1. Borek Vasicek, 2011. "Is Monetary Policy in the New EU Member States Asymmetric?," Working Papers 2011/05, Czech National Bank, Research Department.

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