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Czech Money Market: Emerging Links Among Interest Rates


  • Jan Hanousek
  • Evzen Kocenda


The goal of this paper is to assess the money market in the Czech Republic from 1993 to 1997. The specific interest is in interactions between short and long interest rates, and between exchange and interest rates. During the financial crisis of 1997 the prevailing links among monetary variables tended to gain strength. The mutual links among interest rates provide clear proof that during the crisis the money market had became more efficient than at any time before. This was possible partially because of emerged arbitrage opportunities. The linkages show that turbulence and uncertainty enabled interest rates to again become the price of money as well as to influence the exchange rate. The exchange rate was found to influence only short-term interest rates.

Suggested Citation

  • Jan Hanousek & Evzen Kocenda, 1997. "Czech Money Market: Emerging Links Among Interest Rates," William Davidson Institute Working Papers Series 95, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:1997-95

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    References listed on IDEAS

    1. Gary H. Jefferson & Thomas G. Rawski, 1994. "Enterprise Reform in Chinese Industry," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 47-70, Spring.
    2. Thomas Rawski, 1997. "Who has soft budget constraints?," Global Economic Review, Taylor & Francis Journals, vol. 26(1), pages 29-49.
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    Cited by:

    1. Jes??s Crespo-Cuaresma & Bal??zs ??gert & Thomas Reininger, 2004. "Interest Rate Pass-Through in New EU Member States: The Case of the Czech Republic, Hungary and Poland," William Davidson Institute Working Papers Series 2004-671, William Davidson Institute at the University of Michigan.

    More about this item


    market efficiency; VAR; interest rates; exchange rates; causality;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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