The Effects of Foreign Exchange Interventions in a Small Open Economy: The Case of the Czech Republic in a World Context
|Author:||Mgr. Jan Timko|
|Year:||2015 - summer|
|Leaders:|| doc. Mgr. Tomáš Holub Ph.D.
|Work type:|| Economic Theory
|Awards and prizes:|
|Abstract:||In this thesis we examine the effect of foreign exchange interventions in small open economy, focusing on
the Czech experience. In the first part we model volatility development before and after the intervention
using GARCH model. In the second part we estimate relationship between macroeconomical variables
using vector autoregressive model. In this part we estimate impulse response function of exchange rate
and inflation. In second part of VAR modeling we provide counterfactual analysis, which compare actual
development of variables with alternative scenario in which the interventions would not happen .
Our results suggest that the interventions is associated with few months delayed decrease in volatility.
Base on scenario analysis the interventions increased inflation by approximately 1.5 % and without the
intervention the economy would in deflation around -1 % nowadays