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LEGAL ASPECTS OF DECISION MAKING ON THE CENTRAL BANK’S PRIMARY OBJECTIVE

Martin Pernica

Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, 2017, vol. 11, issue 1, 570-578

Abstract: The Czech National Bank started to intervene in the foreign exchange market to weaken the Czech currency in 2013. The purpose of the article is to analyze the way of deciding on monetary policy of Czech National Bank foreign exchange interventions according with the Czech and European legislation. Another objective of the article is to compare the main monetary policy objectives in the Czech and Slovak legislation. Last but not least, the aim is to evaluate the success of the Odysseus form of the Forward guidance communication strategy and to assess the responsibility of the Czech National Bank for its implementation of monetary policy. Legal regulation of the principal objective of the Czech National Bank has been changed from monetary stability to price stability in the Czech Constitution. The Slovak Constitution has never included the main objective of the Slovak National Bank, to which is directed its activity. Neither of the legal regulations, however, specify what is meant by price stability or instability of prices. Legislation should establish the central bank's focus on financial stability. The Czech legislation should specify how the Czech National bank and the government will inform each other about individual measures, including deadlines. The government should be informed about the planned monetary policy measures in advance. For the decision of the CNB Bank Board on major monetary policy measures, a higher quorum should be achieved.

Keywords: communication strategy; foreign exchange interventions; National Bank of Slovakia; The independence of the Czech National Bank; price stability (search for similar items in EconPapers)
Date: 2017
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