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Impacts of Macroeconomic Policies on Output in the Czech Republic: An Application of Romer's IS-MP-IA Model

  • Yu Hsing
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    Extending Romer's IS-MP-IA model to include foreign trade and exchange rates and applying the GARCH method, the study came to the conclusion that real gross domestic product is negatively associated with the inflation rate, exchange rate depreciation, and the foreign interest rate and positively affected by government deficit spending and world output. Therefore, inflation targeting is an appropriate monetary policy, and the depreciation of the koruna would be harmful to the Czech economy even though it would help the export sector.

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    Article provided by University of Economics, Prague in its journal Prague Economic Papers.

    Volume (Year): 2004 (2004)
    Issue (Month): 4 ()
    Pages: 339-345

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    Handle: RePEc:prg:jnlpep:v:2004:y:2004:i:4:id:246:p:339-345
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    1. Josef C. Brada & Ali M. Kutan, 1999. "The persistence of moderate inflation in the czech republic and the czk crisis of may 1997," Prague Economic Papers, University of Economics, Prague, vol. 1999(4).
    2. Jiří Jonáš, 2000. "In search for a new anchor: inflation targeting in the czech republic," Prague Economic Papers, University of Economics, Prague, vol. 2000(3).
    3. Robert Engle, 2001. "GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 157-168, Fall.
    4. Katerina Smidkova & Ray Barrell & Dawn Holland, 2002. "Estimates of Fundamental Real Exchange Rates for the Five EU Pre-Accession Countries," Working Papers 2002/03, Czech National Bank, Research Department.
    5. M Bahmani-Oskooee & I Miteza, 2003. "Are Devaluations Expansionary or Contractionary? A survey article," Economic Issues Journal Articles, Economic Issues, vol. 8(2), pages 1-28, September.
    6. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," CEPR Discussion Papers 1750, C.E.P.R. Discussion Papers.
    7. Petr Dufek & Marián Vávra & Milan Václavík, 2002. "Analysis of the development of the czech economy in 2001 and outlook for 2002 and 2003," Prague Economic Papers, University of Economics, Prague, vol. 2002(3).
    8. Ali M. Kutan & Josef C. Brada, 1998. "The persistence of moderate inflation in the Czech Republic and the Koruna crisis of May 1997," Working Papers 1998-021, Federal Reserve Bank of St. Louis.
    9. David H. Romer, 2000. "Keynesian Macroeconomics without the LM Curve," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 149-169, Spring.
    10. Halpern, László & Wyplosz, Charles, 1995. "Equilibrium Real Exchange Rates in Transition," CEPR Discussion Papers 1145, C.E.P.R. Discussion Papers.
    11. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    12. Begg, David, 1998. "Pegging Out: Lessons from the Czech Exchange Rate Crisis," CEPR Discussion Papers 1956, C.E.P.R. Discussion Papers.
    13. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, August.
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