Czech Money Market: Emerging Links Among Interest Rates

Jan Hanousek and Evžen Kočenda

No 95, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: The goal of this paper is to assess the money market in the Czech Republic from 1993 to 1997. The specific interest is in interactions between short and long interest rates, and between exchange and interest rates. During the financial crisis of 1997 the prevailing links among monetary variables tended to gain strength. The mutual links among interest rates provide clear proof that during the crisis the money market had became more efficient than at any time before. This was possible partially because of emerged arbitrage opportunities. The linkages show that turbulence and uncertainty enabled interest rates to again become the price of money as well as to influence the exchange rate. The exchange rate was found to influence only short-term interest rates.

Keywords: market efficiency; VAR; interest rates; exchange rates; causality (search for similar items in EconPapers)
JEL-codes: E44 F31 G14 (search for similar items in EconPapers)
Pages: pages
Date: 1997-11-01
New Economics Papers: this item is included in nep-ifn
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