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The Foreign Exchange Interventions of the CNB as an Unconventional Instrument of Monetary Policy

Author

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  • Andrea Cecrdlova

    (University of Economics in Prague)

Abstract

During the last crisis monetary authorities hit zero interest rates and as a result they began to use less standard instruments. However, they failed to meet the declared inflation target for a long time. The Czech National Bank (CNB) decided to use the unconventional instrument in November 2013 when the exchange rate commitment was introduced. The aim of the paper is to evaluate the decision to use the exchange rate commitment with regard to its potential side effects. The most significant side effect is the enormous amount of foreign exchange reserves, which, due to the appreciation of the domestic currency, can get the CNB into more cumulative negative values than it already is.

Suggested Citation

  • Andrea Cecrdlova, 2018. "The Foreign Exchange Interventions of the CNB as an Unconventional Instrument of Monetary Policy," Proceedings of Economics and Finance Conferences 6910191, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:6910191
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    File URL: https://iises.net/proceedings/10th-economics-finance-conference-rome/table-of-content/detail?cid=69&iid=007&rid=10191
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    More about this item

    Keywords

    CNB; monetary policy; unconventional monetary instruments; foreign exchange interventions; foreign exchange reserves.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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