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

Magdalena Morgese Borys and Roman Horvath

No wp922, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: within VAR, structural VAR, and the Factor-Augmented VAR framework. We document a well-functioning 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 contractionary monetary policy shock has a negative effect on the degree of economic activity and price level, both with a peak response after one year or so. Regarding the 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 single monetary policy regime. There is a rationale in using the real-time 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 domestic currency after monetary tightening with a gradual depreciation afterwards.

Keywords: monetary policy transmission; VAR; real-time data; sectoral prices (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Pages: pages
Date: 2008-05-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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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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