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Efficiency Of Czech National Bank's Monetary Policy And Reasons For Inflation Targeting


  • Jiří Podpiera


This paper offers the analysis ofCzech monetary policy effectiveness during 1993-1996, which was based on the monetarist theory reconunendations. Also, the reasons for inflation targeting policy irnplementation by the Czech National Bank (CNB) are reviewed. In order to accomplish these goals, we develop money demand model based on the Keynesian approach and also use Cagan's model of hyperinflation. Then, we test the validity of these models for the Czech environment. The major conclusion from the Keynesian money demand model estirnation is that the efficiency of nominal interest rate policy is lower tmder the conditions of sudden nominal interest rate increase. Cagan's model of hyperinflation is used to investigate the stability of price level and thus to ascertain whether the Czech economyexperienced "self generating" price growth. We also analyze inflation expectations and uncertainty. Such au analysis ought to elucidate the existence of a rationale for implementing inflation targeting policy. The estirnation technique employs extended Kalmau filter with backward filter runs, which enables us to estimate parameters varying in time.

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  • Jiří Podpiera, 1998. "Efficiency Of Czech National Bank's Monetary Policy And Reasons For Inflation Targeting," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 5(8).
  • Handle: RePEc:czx:journl:v:5:y:1998:i:8:id:63

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    References listed on IDEAS

    1. Dirk Tasche, 2004. "The single risk factor approach to capital charges in case of correlated loss given default rates," Papers cond-mat/0402390,, revised Feb 2004.
    2. Konstantin Belyaev & Aelita Belyaeva & Tomas Konecny & Jakub Seidler & Martin Vojtek, 2012. "Macroeconomic Factors as Drivers of LGD Prediction: Empirical Evidence from the Czech Republic," Working Papers 2012/12, Czech National Bank, Research Department.
    3. Acharya, Viral V. & Bharath, Sreedhar T. & Srinivasan, Anand, 2007. "Does industry-wide distress affect defaulted firms? Evidence from creditor recoveries," Journal of Financial Economics, Elsevier, vol. 85(3), pages 787-821, September.
    4. Jiri Witzany, 2011. "A Two Factor Model for PD and LGD Correlation," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 18(28).
    5. Jon Frye, 2000. "Depressing recoveries," Emerging Issues, Federal Reserve Bank of Chicago, issue Oct.
    6. Stefano Caselli & Stefano Gatti & Francesca Querci, 2008. "The Sensitivity of the Loss Given Default Rate to Systematic Risk: New Empirical Evidence on Bank Loans," Journal of Financial Services Research, Springer;Western Finance Association, vol. 34(1), pages 1-34, August.
    7. Seidler, Jakub & Horvath, Roman & Jakubík, Petr, 2009. "Estimating expected loss given default in an emerging market: the case of Czech Republic," Journal of Financial Transformation, Capco Institute, vol. 27, pages 103-107.
    8. De Graeve, F. & Kick, T. & Koetter, M., 2008. "Monetary policy and financial (in)stability: An integrated micro-macro approach," Journal of Financial Stability, Elsevier, vol. 4(3), pages 205-231, September.
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