The Effects of Monetary Policy in the Czech Republic: An Empirical Study

Magdalena Morgese Borys and Roman Horvath

Working Papers from Czech National Bank, Research and Statistics Department

Abstract: In this paper, we examine the effects of Czech monetary policy on the economy within the VAR, structural VAR, and factor-augmented VAR frameworks. We document a wellfunctioning transmission mechanism similar to the euro area countries, especially in terms of persistence of monetary policy shocks. Subject to various sensitivity tests, we find that a contractionary monetary policy shock has a negative effect on the degree of economic activity and the price level, both with a peak response after one year or so.Regarding prices at the sectoral level, tradables adjust faster than non-tradables, which is in line with microeconomic evidence on price stickiness. There is no price puzzle, as our data come from a single monetary policy regime. There is a rationale in using the realtime output gap instead of current GDP growth, as using the former results in much more precise estimates. The results indicate a rather persistent appreciation of the domestic currency after a monetary tightening, with a gradual depreciation afterwards.

Keywords: Monetary policy transmission; real-time data; sectoral prices; VAR. (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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https://www.cnb.cz/export/sites/cnb/en/economic-re ... wp/cnbwp_2008_04.pdf

Related works:
Journal Article: The effects of monetary policy in the Czech Republic: an empirical study (2009)
Working Paper: The Effects of Monetary Policy in the Czech Republic: An Empirical Study (2008)
Working Paper: The Effects of Monetary Policy in the Czech Republic: An Empirical Study (2008)
Working Paper: The Effects of Monetary Policy in the Czech Republic: An Empirical Study (2007)
Working Paper: The Effects of Monetary Policy in the Czech Republic: An Empirical Study (2007)
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