IDEAS home Printed from https://ideas.repec.org/a/prg/jnlpol/v2012y2012i4id858p484-504.html
   My bibliography  Save this article

Je možné předpovídat repo sazbu ČNB na základě zpět hledícího měnového pravidla?
[Is it Possible to Predict the CNB Repo Rate on the Basis of the Backward-Looking Monetary Rule?]

Author

Listed:
  • Josef Arlt
  • Martin Mandel

Abstract

The aim of our paper is to formulate and empirically verify the simple backward looking econometric model of the monetary rule, which would be able to describe the development of CNB repo rate, namely only on the basis of statistically measured and in the given time available information. We focus on the period after 1998, when the CNB´s inflation targeting policy is implemented and the repo rate (14 days) plays the role of the monetary policy rate. In the paper we discuss some methodological problems associated with the "ex post" empirical verification of the central bank monetary rule. We construct an empirical model of the monetary rule, justify the choice and the inclusion of explanatory variables, we analyze the statistical properties of time series and verify the alternative forms of econometric models. Our analysis showed that the development of CNB repo rate in the reporting period can be explained by the past and present evolution of three explanatory variables: the yearly inflation rate, the exchange rate and the ECB repo rate. The annualized inflation rate proved to be statistically insignificant in the model. We find interesting that the statistical quality of the estimated model was further increased after a six-month delay of the yearly inflation rate. The obtained results indicate that in determining the CNB repo rate the expected future level of the yearly inflation rate does not play important role and the last yearly inflation rate is more important than its present level.

Suggested Citation

  • Josef Arlt & Martin Mandel, 2012. "Je možné předpovídat repo sazbu ČNB na základě zpět hledícího měnového pravidla?
    [Is it Possible to Predict the CNB Repo Rate on the Basis of the Backward-Looking Monetary Rule?]
    ," Politická ekonomie, University of Economics, Prague, vol. 2012(4), pages 484-504.
  • Handle: RePEc:prg:jnlpol:v:2012:y:2012:i:4:id:858:p:484-504
    as

    Download full text from publisher

    File URL: http://www.vse.cz/polek/download.php?jnl=polek&pdf=858.pdf
    Download Restriction: free of charge

    File URL: http://www.vse.cz/polek/858
    Download Restriction: free of charge

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Martin Mandel & Vladimír Kosmata, 2000. "The czech embarrassment of inflation targeting in transition," Prague Economic Papers, University of Economics, Prague, vol. 2000(3).
    2. Ramon Maria-Dolores, 2005. "Monetary Policy Rules In Accession Countries to EU: Is the Taylor rule a pattern?," Economics Bulletin, AccessEcon, vol. 5(7), pages 1-16.
    3. repec:ebl:ecbull:v:5:y:2007:i:3:p:1-11 is not listed on IDEAS
    4. Svensson, Lars E. O., 1999. "Inflation targeting as a monetary policy rule," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 607-654, June.
    5. Frömmel, Michael & Schobert, Franziska, 2006. "Monetary Policy Rules in Central and Eastern Europe," Hannover Economic Papers (HEP) dp-341, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    6. Andrews, Donald W K & Monahan, J Christopher, 1992. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Econometrica, Econometric Society, vol. 60(4), pages 953-966, July.
    7. M. S. Mohanty & Marc Klau, 2004. "Monetary policy rules in emerging market economies: issues and evidence," BIS Working Papers 149, Bank for International Settlements.
    8. Yash P. Mehra, 1999. "A forward-looking monetary policy reaction function," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 33-54.
    9. repec:ebl:ecbull:v:5:y:2005:i:7:p:1-16 is not listed on IDEAS
    10. Jaromir Benes & Tibor Hledik & Michael Kumhof & David Vavra, 2005. "An Economy in Transition and DSGE: What the Czech National Bank’s New Projection Model Needs," Working Papers 2005/12, Czech National Bank, Research Department.
    11. Svensson, Lars E. O., 2000. "Open-economy inflation targeting," Journal of International Economics, Elsevier, vol. 50(1), pages 155-183, February.
    12. Juan Paez-Farrell, 2007. "Understanding monetary policy in Central European countries using Taylor-type rules: the case of the Visegrad four," Economics Bulletin, AccessEcon, vol. 5(3), pages 1-11.
    13. Josef Arlt & Milan Bašta, 2010. "The Problem of the Yearly Inflation Rate and Its Implications for the Monetary Policy of the Czech National Bank," Prague Economic Papers, University of Economics, Prague, vol. 2010(2), pages 99-117.
    14. Jaromír Beneš & Jaromír Hurník & David Vávra, 2008. "Exchange Rate Management and Inflation Targeting: Modeling the Exchange Rate in Reduced-Form New Keynesian Models," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(03-04), pages 166-194, May.
    15. 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.
    16. John B. Taylor, 2001. "The Role of the Exchange Rate in Monetary-Policy Rules," American Economic Review, American Economic Association, vol. 91(2), pages 263-267, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Josef Arlt & Martin Mandel, 2014. "The Reaction Function of Three Central Banks of Visegrad Group," Prague Economic Papers, University of Economics, Prague, vol. 2014(3), pages 269-289.
    2. Jaromír Kukal & Tran Van Quang, 2014. "A Monetary Policy Rule Based on Fuzzy Control in an Inflation Targeting Framework," Prague Economic Papers, University of Economics, Prague, vol. 2014(3), pages 290-314.

    More about this item

    Keywords

    econometric model; repo rate; monetary-policy rules; yearly inflation rate;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prg:jnlpol:v:2012:y:2012:i:4:id:858:p:484-504. 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: (Frantisek Sokolovsky). General contact details of provider: http://edirc.repec.org/data/uevsecz.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.