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Evaluating changes in the monetary transmission mechanism in the Czech Republic

Michal Franta, Roman Horvath and Marek Rusnák

Empirical Economics, 2014, vol. 46, issue 3, 827-842

Abstract: We investigate the evolution of the monetary policy transmission mechanism in the Czech Republic over the course of the 1996–2010 time period through the use of a time-varying parameters Bayesian vector autoregression model with stochastic volatility. We evaluate whether the response of GDP and the price level to exchange rate or interest rate shocks has changed over time, focusing on the period of the recent financial crisis. Our results suggest that prices have become increasingly responsive to monetary policy shocks. However, in terms of credible intervals, the stability of the monetary policy transmission mechanism in the Czech Republic cannot be rejected. Furthermore, it is demonstrated that the exchange rate pass-through has largely remained stable over time. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Monetary policy transmission; Sign restrictions; Time-varying parameters; E52; E44 (search for similar items in EconPapers)
Date: 2014
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Related works:
Working Paper: Evaluating Changes in the Monetary Transmission Mechanism in the Czech Republic (2012) Downloads
Working Paper: Evaluating Changes in the Monetary Transmission Mechanism in the Czech Republic (2011) Downloads
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DOI: 10.1007/s00181-013-0699-0

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