Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate

Dominika Kolcunová and Tomas Havranek

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: The paper focuses on the estimation of the effective lower bound for the Czech National Bank's policy rate. The effective lower bound is determined by the value below which holding and using cash would be more convenient than deposits with negative yields. This bound is approximated based on storage, the insurance and transportation costs of cash and the costs associated with the loss of the convenience of cashless payments and complemented with the estimate based on interest charges, which present direct costs to the profitability of the bank. Overall, the estimated value is below -1% and is approximately in the interval -1.6%, -1.1%. In addition, by means of a vector autoregression, we show that the potential of negative rates would not be sufficient to deliver monetary policy easing with effects similar to those of the exchange rate commitment.

Keywords: effective lower bound; negative interest rates; costs of holding cash; transmission of monetary policy (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2018
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 (5)

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https://www.econstor.eu/bitstream/10419/175753/1/estimating-effective-lower.pdf (application/pdf)

Related works:
Journal Article: Estimating the Effective Lower Bound on the Czech National Bank’s Policy Rate (2018)
Working Paper: Estimating the Effective Lower Bound on the Czech National Bank's Policy Rate (2018)
Working Paper: Estimating the Effective Lower Bound for the Czech National Bank’s Policy Rate (2018)
Working Paper: Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:175753

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