Detail publikace

The Czech Exchange Rate Floor: Depreciation without Inflation?

Autor: PhDr. Jaromír Baxa Ph.D.,
Mgr. Ing. Tomáš Šestořád ,
Typ: IES Working Papers
Rok: 2019
Číslo: 6
Publikováno v: IES Working Papers 6/2019
Místo vydání: Prague
Klíčová slova: Exchange rate commitment, exchange rate pass-through, time-varying parameters, VAR, zero lower bound
JEL kódy: C32, E52, F41
Citace: Baxa J. and Šestořád T. (2019): "The Czech Exchange Rate Floor: Depreciation without Inflation?" IES Working Papers 6/2019. IES FSV. Charles University.
Abstrakt: After the introduction of an exchange rate commitment and an immediate 7% depreciation of the Czech koruna of in 2013, output growth resumed but inflation remained low. Consequently, the Czech National Bank did not return policy to normal for more than three years. Using a time-varying parameter VAR model with stochastic volatility, we show that this was not surprising. The exchange rate pass-through to prices had been rather low and gradually decreasing since the early 2000s, suggesting limited potential effects of the exchange rate commitment on inflation. On the other hand, the pass-through to output growth increased. These results hold even when the period of the exchange rate floor and the zero lower bound is excluded from the sample, and they are robust to other sensitivity checks. Our results are consistent either with a flattened Phillips curve, or rising quality of the Czech exports and participation in global value chains, or a small effect of the exchange rate commitment on inflation expectations when not paired with temporary price-level targeting. Moreover, we highlight the usefulness of models accounting for time variation of parameters for policy analysis.
Ke stažení: wp_2019_06_baxa_sestorad




Patria Finance