Publication detail

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

Author(s): Mgr. Dominika Ehrenbergerová (Kolcunová) ,
prof. PhDr. Tomáš Havránek Ph.D.,
Type: IES Working Papers
Year: 2018
Number: 22
Published in: IES Working Papers 22/2018
Publishing place: Prague
Keywords: effective lower bound, zero lower bound, negative interest rates, costs of cash, transmission of monetary policy
JEL codes: E52, E58, E43, E44
Suggested Citation: Kolcunova D. and Havranek T. (2018): "Estimating the Effective Lower Bound for the Czech National Bank’s Policy Rate" IES Working Papers 22/2018. IES FSV. Charles University.
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 preferable to deposits with negative yields. This bound is approximated based on storage, insurance and transportation costs of cash and the loss of convenience associated with cashless payments and complemented with the estimate based on interest charges which present direct costs to the bank profitability. Overall we get a mean value slightly below −1%, approxi- mately in the interval (−2.0%, −0.4%). 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 similar in its effects to the impact of the Czech National Bank’s exchange rate commitment during the years 2013–2017.
Downloadable: wp_2018_22_havranek


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