 Czech Republic: Reserve Requirements, 1997Benjamin Hoffner ()
Journal of Financial Crises, 2022, vol. 4, issue 4, 442-455 Abstract: In the first quarter of 1997, fiscal and current account deficits in the Czech Republic put pressure on the koruna's pegged exchange rate as capital flowed out of the domestic economy. Although the Czech National Bank (CNB) committed to tight monetary policy to protect the peg, on April 11, the CNB announced a lowering of the minimum reserve requirement (RR) ratio from 11.5% to 9.5%, effective May 8. The RR ratio (RRR) reduction (RRR) reflected a compromise with the government, which had petitioned the central bank to ease monetary policy. To improve the balance of payments, the government also implemented budget cuts along with several other economic correction measures. Most novel among these measures was a scheme that required importers to deposit funds temporarily with the central bank, which helped sterilize the liquidity produced by the RRR reduction. Nevertheless, the koruna continued to face intense speculative attacks. On May 26, the CNB abandoned the peg and switched to a managed float. The CNB said that the May 1997 RRR reduction released CZK 20 billion (USD 660 million) of liquidity into the system during the crisis, although about half of that was offset by the import deposit scheme. Keywords: Czech Republic; liquidity rules; reserve ratio; reserve requirements (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ysm:ypfsfc:v:4:y:2022:i:4:p:442-455 Access Statistics for this article More articles in Journal of Financial Crises from Yale Program on Financial Stability (YPFS) Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.