Czech Republic: Selected Issues

International Monetary Fund

No 2017/169, IMF Staff Country Reports from International Monetary Fund

Abstract: This Selected Issues paper analyzes the Czech Republic’s monetary policy after removal of the exchange rate floor. The koruna-euro exchange rate floor, which had been in place for more than three years, was eliminated in the beginning of the second quarter of 2017. Exit poses a number of challenging policy questions, including on the optimal monetary policy in its aftermath. The simulations indicate that a monetary policy response that is ex-post too loose is likely to be less costly than a monetary policy response that is ex-post too tight. This suggests that a gradual approach to interest rate increases is advisable.

Keywords: ISCR; CR; monetary policy; exchange rate; interest rate; exchange rate appreciation; inflation objective; rule equation; output gap volatility; inflation target band; monetary policy response; trend exchange rate path; inflation expectation; cost-push pass-through; Inflation; Exchange rates; Output gap; Exchange rate pass-through; Real exchange rates; Global (search for similar items in EconPapers)
Pages: 17
Date: 2017-06-26
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