E58 - Central Banks and Their PoliciesNávrat zpět

The relationship between monetary policy and inequality has received limited attention in the economics literature. This study aims to contribute to the literature by examining the relationship between monetary policy and income inequality in developing countries, specifically by analysing the results of the Turkish experiment. The local projection method was used to determine the relationship between monetary policy shocks, obtained through the VAR model, and the calculated inequality measures. The main findings of the study suggest that monetary policy can potentially influence the distribution of total income, particularly when the monetary policy shock is significant. The results indicate that monetary policy has a significant impact on income distribution, favouring property income. Moreover, this effect is most pronounced among the highest-income group, highlighting the heterogeneous nature of the impact across different income groups. However, the middle 20% group experiences the sharpest deterioration in income distribution following monetary policy shocks.

The non-maturing deposit (NMD) pass-through rate represents a key parameter needed in the process of managing interest rate risk of the banking book (IRRBB). NMD interest rates for retail and corporate segments are usually not directly linked to market interest rates, but depend rather on the bank’s marketing strategy, market competition, liquidity, and possibly on other factors. The ratio at which banks adjust their NMD interest rates to changes in interbank market interest rates is known as the NMD pass-through rate. The goal of this paper is to analyse the variability of NMD pass-through rates in the 19 Eurozone countries and identify their possible determinants. The pass-through rates are estimated using cointegration analysis based on datasets available from the ECB Statistical Data Warehouse and the results show significant variability between countries. To analyse the determinants of pass-through rates in the Eurozone, the rates are regressed on nine aggregates of the country-level banking sector including concentration, profitability or funding, and three macroeconomic and socio-economic variables. Out of the tested predictors, the ratio of wholesale funding to liabilities was found to be the most significant predictor of retail and corporate pass-through rates, with a positive coefficient, indicating that countries where banks rely more heavily on wholesale funding exhibit higher pass-through of market interest rate changes to NMD deposit rates. Additionally, the loan-to-deposit ratio was found to have a significantly negative impact on retail pass-through rates, while the return on equity has a significantly positive impact on the corporate pass-through rates.

The article focuses on the motives and trends in gold holdings by central banks in recent decades. It examines the correlation between the nominal and real price of gold and selected macroeconomic variables and financial assets over the financial and business cycles. In this context, it outlines gold investment opportunities for central banks and other investors. The paper also highlights differences in gold holdings between the central banks of advanced economies (including those with reserve currencies) and those of emerging market and developing economies. It concludes by presenting a rationale for the position of the Czech National Bank, which ranks among the modern central banks holding minimal amounts of reserve gold.

The central banks of developed countries and those in the region of Central Europe responded to the global financial crisis of 2008 and subsequent economic recession by considerably easing monetary conditions and using new monetary policy tools. One of those tools was the entry into the so far uncharted territory of negative interest rates. The passage of some years after the inception of these new tools has allowed the emergence of new empirical literature, which addresses their effects and effectiveness. The primary objective of this paper is to examine and summarize the empirical literature that deals with the effective lower limit of interest rates, especially in relation to the banking sector and bank interest margins. We then use empirical findings from other countries and apply them to the Czech Republic and draw conclusions for the future monetary policy of the CNB. Our results confirm that the CNB has got enough manoeuvring room even in the area of negative interest rates, which it can take advantage of either for the purpose of price stability, or for more effective management of FX operations.

This paper tests the usability of the Taylor rule under the conditions of the Czech economy using a single-equation error correction model in the period from 2000 to the second quarter of 2019 and finds key variables for the CNB's monetary policy setting. Other important monetary policy rules and their effect on the optimal monetary policy setting are also discussed. The starting point of the empirical part is a summary of the current monetary policy of the CNB and an analysis of its decision model. Since 2008, the new DSGE model g3 replaced the previous QPM model. At the end of the theoretical part, foreign experience and various approaches to the estimation of the Taylor rule are summarized. The CNB's two-week repo rate is best described by the size of the output gap in the domestic economy, the ECB's base refinancing rate, the change in the price level measured by the consumer price index and the previous value of the repo rate. The paper also analyses the relationship between the repo rate and the ECB's basic refinancing rates, confirming the historically high dependence of domestic monetary policy on the ECB's actions.

The article describes both the theory and the practice of exiting from the unconventional monetary policy of quantitative easing (QE). At the theoretical level, the following issues are outlined: exit step sequence, options to decrease the amount of securities purchased, relationship between exit and interest rate hike, communication of the change and liquidity-absorbing instruments. Further, examples from Japan, the United Kingdom and the USA are introduced, especially regarding their experience with the QE exit. In detail, the monetary policy-related numbers (QE purchases, QE portfolio, central bank balance sheet, monetary base and reserves) are observed both before and after the exit announcement. The charts of these changes prove to be substantially different, mainly due to unique key features of each QE policy and diverse exit strategies.

There are many myths associated with gold, especially its historical role. Notably the supporters of free banking criticise the current monetary system and consider present money unbacked. This does not correspond to the fact that the money is backed by the assets of the issuers. There are demands to return to full gold backing. The analysis of the share of gold in the monetary base and in the monetary aggregates M1 and M2 for the United States of America and the Czech Republic over the period 1993-2016 shows a complete shortage of gold. The results are in units or tenths of percent. The author discusses some other unsolved issues, primarily the high price volatility and the impossibility of unlimited convertibility. Attention is also paid to currency board systems with full foreign currency backing. With the hypothetical admission of full gold backing, restricting the money supply by the amount of gold would quickly and dramatically curtail the supply of credit, with subsequent impacts on economic growth. Requirements for full gold backing of present money are completely illusory.

We analyze and quantify link between quality of the banking sector and sovereign risk in the states of the European Union (EU) using data over 1999-2014. We employ two market-based measures of the sovereign risk along with several empirically and theoretically motivated variables that characterize banking sector. We perform Bayesian estimations on several panels of countries. Our results show that higher ratio of the non-performing loans represents the most important industry-specific variable that is linked with a heightened rate of the sovereign risk. On the other hand, findings related to the size and depth of the banking sector, along with the capital adequacy ratio, are less clear-cut. Higher penetration of the foreign banks and higher degree of competition characterize a diversified structure of the banking industry that seems to be beneficial for the banking sector stability and is linked with lower sovereign risk.

Advanced countries are losing their predominant position in the world economy. With the long-time productivity slowdown and the present long recession, a question arises about the threat of secular stagnation of the advanced world. In searching for the roots of this threat, leading world economistst accentuate either the demand side, or the supply side of the economy. In this respect, the authors add globalization as another important factor. Globalization has resulted in long-term global and internal imbalances, and caused deep problems in the advanced countries - deindustrialization, unemployment, growing dependence on the social safety net, and a permanent increase of government intrusion into the economy. After the 2008 crisis, fiscal and monetary policy concentrates on short-term support of economic recovery, leaving aside the deeper long-term deficiencies. With multiple negative trends acting in the same direction, the threat of secular stagnation should not be overlooked.

The article deals with the two key issues that have been fundamentally changing the European Union - the crisis of Eurozone and the Brexit. The first part discusses the change of the original balance of power in the EU after the exit of Britain and its possible consequences, especially the strengthening of the relative position of France, and hence the French concept of the EU integration model (deeper federalization of the nucleus and the rest) resulting in an even more explicit model of the two-speed EU. In the ideal Pareto model of the Union, paradoxically, the possibility of exit makes the Union more stable and compact. The second part of the text discusses the problem of the uncompetitiveness of Southern Europe as a specific case of Dutch Disease and four scenarios of its solution - the disinflation or deflation of the South, the inflation of the North, the exit from the common currency and finally the transfer union. The last named scenario is the least attractive of given options, but it is already in progress. The imbalances in the Target 2 payment system discussed in the article are example of this. The conclusion of the article brings ten points summarizing necessary economic and political measures for the EU at the time of power shift after the Brexit and ongoing imbalances between the North and the South in the currency union.

Basel III responded to the financial crisis among other by redefining and expanding the capital requirements and by introduction of the liquidity requirements in the banking sector. Since banks' liquidity and capital positions influence each other through assets structure channel, asset quality channel and profitability channel, there exists a significant relationship among capital and liquidity regulatory tools. A bank can improve its capital and liquidity ratios by lowering risk-weighted assets (assets structure channel), but with the negative impact on the interest profit (profitability channel). We therefore aim to test the functionality of these two channels in relation to capital and liquidity positions in the Czech banking sector. We document the effect of the assets structure channel in case of liquidity and capital positions and effect of the profitability channel for the large banks. However, low profitability and introduction of a leverage ratio can limit the effect of assets structure channel on banks´ capital positions.

The forecast-based reaction function of the European Central Bank (ECB) is estimated in this paper and the change in the monetary policy regime is discussed in the context of the current economic crisis. ECB/Eurosystem staff projections database is utilized in order to estimate the rule. The advantage of using this database is demonstrated by comparing the results of econometric estimation utilizing these data on projections with the results obtained by popular method of using future values as proxies for expectations. This popular method is shown to be inadequate in this paper not only by econometric verification of alternative forms of the estimated reaction function. Its inadequacy is demonstrated also by analyzing statistical properties of the time series and by showing that standard econometric assumptions do not hold when using future values as proxies for expectations. It is further shown that current values are more suitable proxies for expectations than values actually observed in the future. This fact provides an answer to the question analyzed recently by Arlt, Mandel (2012), (2014) who investigated how is it possible that simple backward-looking rules perform extremely well when describing forward-looking behavior of central banks.

Crisis development in some banking systems has been associated with large-scale aid programs, which has been heavily involved with the central bank's impact on the very rapid growth of their balance sheets. The banking system in the Czech Republic in the period 2005-2015 has not undergone any crisis. Significant changes in the balance of the Czech National Bank were associated with foreign exchange interventions against the Czech crown. High liquidity determines almost zero demand of banks for loans from the central bank. The Czech National Bank is in the "debtor" position in relation to banks. Central banks in the European Monetary Union and the United States are in the opposite position of the creditors. The dramatic growth in bank reserves had no significant inflationary pressures. The main reason is careful supply of bank loans. All this confirms that issuing money into the economy is associated especially with commercial banks' lending to non-bank subjects. Central bank issues money only to the banking system.

This paper focuses on impact of central bank's oral commentaries on asset prices, i.e. verbal interventions. The paper maps basic preconditions and key channel how central bank's words mirror into asset prices. A significant part of the paper concentrates on the Czech Republic where the exchange rate floor and accompanying frequent comments from the CNB's Bank Board are in operation since 2013. The first hypothesis tests whether there is asset price-making information during the Bank Board decision days. In this sense, the factor analysis confirms at least two factors which influence various asset prices. It is assumed that former factor concerns the surprise in monetary policy decision and the latter following press conference. The second hypothesis endeavours to specify the components of verbal interventions: position in the Bank Board, verbal intervention form and visibility of intervention topic. Only comments made by the CNB's governor proved to be significant, leading to higher volatility of the exchange rate.

The paper examines the quantitative easing as a policy contributing to government debt sustainability in the context of government debt cycle. Thus, the emphasis is primarily not put on the rescue of financial system after the collapse of Lehman Brothers. Instead, the attention is paid to a role of central bank as a lender of last resort in government bond markets and quasi-fiscal motivation of the quantitative easing programs. The theoretical part of the analysis defi nes quasi-fiscally motivated QE program, government adjusted net debt position plus its determinants and a rate of debt monetization. Empirical analysis focuses on the case of three large economies - United States, United Kingdom and Japan, empirical defi nition of quasi-fiscally motivated quantitative easing, net debt position of their governments as well as the explanation of significant empirical relationships between its determinants. The paper concludes that the most important factor infl uencing net debt position dynamics is economic growth which cannot be relied on in bust phase of debt cycle. Thus, the decisive role is played by quantitative easing and related interest transmission channel as remaining factor influencing dynamics of government fnancial assets and liabilities.

The article deals with the theoretical issues of macro-prudential policy, the influence of risk channel of monetary policy on financial stability and the cooperation of macro-prudential and monetary policy, respectively the compatibility of the objectives of these policies. On the Czech economy data is therefore tested the relationship between monetary policy conditions and prices of selected categories. The model results open the door to greater use especially of the industrial producer price index, respectively its sub-indices, for the coordination of monetary and macro-prudential policy in the Czech Republic.

The paper explains wider economic, financial and macroeconomic context of the unconventional monetary policy during 2001-2006 in Japan. The objective of the article is complex discussion of Bank of Japan's unconventional monetary policy measures from theoretical and practical point of view. The structure of the papers is following: the fi rst part reveals macroeconomic condition behind unconventional monetary policy, the second part describes changes in monetary policy implementation, focuses also on commercial assets purchasing and describes exit strategy as well. The last part of the paper evaluates unconventional monetary policy impacts. Bank of Japan achieved accommodative financial condition and reduced uncertainty in the money market. Large liquidity buffer works preventive in case of unexpected liquidity shocks. Excess ample liquidity did not support prices and real economic activity considering broader deleveraging process and corporate markets fragmentation. Entry and exits strategy was successful without financial markets disruption but exit was not complete. Finally, the paper can conclude, that unconventional monetary policy had positive stabilization effect without significant transmission to the real economy.

The aim of this paper is the formulation and econometric estimation of a small macroeconomic model, which is intended to provide an understanding of fundamental economic relationships in the eurozone. Unemployment is used to represent real economic activity. Phillips curve links unemployment with infl ation and Taylor rule describes the monetary policy of the European Central Bank. The results from econometric estimation indicate that interest rate policy of the European Central Bank has only a very limited effect on unemployment. Furthermore, the reaction coeffi cient for infl ation in the Taylor rule does not support Taylor principle. This paper also presents original method for measuring NAIRU. The proposed method for estimating NAIRU uses probabilities of fi nding and loosing a job. These probabilities are made endogenous in the model, which is the main contribution of the paper.

The goal of the article is a qualitative and quantitative analysis of the relationship among savings, investments and credits in a business cycle in the Czech Republic. The presented analysis brings specific recommendations on the interaction between monetary policy and macroprudential regulation. The article starts with a critical analysis of the Austrian Economic School and its monetary theory of business cycle, which provides a methodological base for further empirical analysis in the paper. Based on the data of the Czech economy, the authors empirically test a hypothesis whether credits create a financial bubble when a credit growth exceeds a real GDP growth. The financial cycle had a significantly higher volatility comparing to real business cycle volatility in the Czech Republic in the period 1997-2013. The existence of the credit bubble was confirmed by statistically significant model parameters, when using the differences in relative year on year changes of banking client credits as a depended variable and relative year on year changes of real GDP as an independent variable. Currently valid European regulation doesn't allow using the same tools to host regulator and supervisor towards the bank subsidiaries and branches in a need to react to the different phases of financial cycle. If a host supervisor needs to influence and safeguard the financial stability, it has only the following tools applying to both forms of banking operations in the host countries: counter cyclical capital buffer, capital regulation of real estate exposures, and setting the loan to value (income) limits.

The paper is discussing CNB FX intervention and its impact on all segments of Czech financial markets from process and volumes of transactions point of view and possible consequences. The focus is on foreign exchange, bond and stock market. Although the impact of FX intervention was evident on all markets under discussion, it was not so significant having macroeconomic effects. The only exception is the FX market. The Czech National Bank contributed to the widening gap between market and equilibrium exchange rate. The undervalued Czech currency will have a temporal positive impact on the macroeconomic external balance.

For the purpose of monetary policy analyses dynamic multivariate models are usually applied. The reason is the presence of significant lags between an action and the appropriate effects in the economy. We use the concept of structural VAR models, widely used approach next to the DSGE and simultaneous equations models. We estimate four and five variable VAR containing the key macroeconomic indicators and identify monetary transmission mechanism using SVAR. Using different identification schemes and impulse response functions we compare the effect of a restrictive monetary policy shock on the set of analysed variables, especially price level. We also compare the results of defined models for the Czech and Polish economies, that both intend to enter EMU. To avoid the possibility of a price puzzle effect, as a result of mixing policy regimes in the sample period, we use data from single monetary policy regime starting 1998, when the Czech central bank switched to the inflation targeting regime. The results indicate high sensitivity to the identification schemes in SVAR and not significant differences between responses to monetary policy shock in CR and Poland.

The paper discusses Federal reserve's monetary policy during banking crisis interim 1929 - 1933. Main goal of the paper is to discuss the monetary policy implementation problems during 1930s based on Real-bills and Riefler-Burgess doctrine. First part of the paper reveals possible conflict between FED's monetary tools and targets arising from gold exchange standard. Expansionary monetary policy during banking crisis was potentially strongly limited by conflict among U.S. financial stability and sustainability of the gold standard. The second part describes monetary policy implementation during 1920s. The third part discusses FED's open market operations during the banking crisis and the fourth part explains the behavior of the interest rates. Finally, the work concludes that FED managed liquidity of U.S. banking system inappropriately and caused many bank deposit suspensions. FED considered monetary condition to be easy and sufficient to cover needs of production. Money interest rates responded very moderately to shortage of banking system's liquidity. We can find the origin of quantitative easing in 1932 when FED first bought large quantities of government securities. This policy was insufficient because of short term duration and the gold outflow neutralizations.

The aim of this article is to estimate the mutual interaction of monetary and fiscal policy in the Visegrad Group countries, i.e. in the Czech Republic, Slovakia, Poland, and Hungary. The relations between monetary and fiscal policy - its coordination, cooperation or mutual antagonism - are basic determinants of successful economic policy implementation of each country. Fiscal and monetary policies usually have different aims. Therefore, some conflict situations may arise in practical economic and political decision-making process. Methodical approaches of this article are based on the game theory, which deals with the analysis of a wide range of decision-making situations with more participants (players); it is primarily focused on the conflict situations. Our results confirm the stabilizing role of monetary policy in the Czech Republic, Poland, and Hungary, also the dominant role of monetary policy in the Czech Republic and the dominant role of fiscal policy in Hungary. In the case of Slovakia, inconsistent results concerning the monetary policy role are probably caused by its EMR II membership and Eurozone entry in 2009.

The article deals with the theoretical issues of macroprudential policy, shift of monetary policy paradigm towards application of so called "leaning against the wind" strategy and mutual cooperation of these policies, which are both aimed at maintaining financial stability. For detection of financial instability are mainly used early warning indicators, which are most often based on the credit activity of the economy and asset prices development. In the second part, we examine the impact of the credit activity in the Czech Republic on the prices of particular assets and its subsequent effect on the consumer price index.

Central banks of major advanced economies have already started their sixth year of the greatest ever experiment in monetary policy at place. First, special measures were taken to prevent collapse of financial intermediation. At the same time main policy rates were cut down to historical lows hitting the zero lower bound quite soon after the onset of the financial crisis. After that central banks realised various unconventional measures in order to support their weak economies. While exceptional instruments aimed at restoring financial markets seem to have been inevitable to avert a collapse of a much greater magnitude in the short run, some other measures have remained disputable. Not only had these measures limited effectiveness in restoring stronger and sustainable economic growth, but concerns have also been raised recently about their unintended consequences. These side-effects concern not only domestic economies but international spillovers on many vulnerable less advanced and/or developing economies have been evident. Moreover, potential risks of the unprecedented measures may start to act fully in a longer horizon. Quantitative easing has led to enormous increases in balance sheets of the Fed, the BoE and ECB; however structural differences on the asset side have been evident. Main challenge for major central banks thus seems to be the right timing and structure of inevitable exit strategies in the near future so that a smooth exit with minimal side effects could be guaranteed.

The paper deals with a theoretical and empirical analysis of determinants of both net international investment position/GDP ratio and net costs of negative investment position using the case of the Czech Republic in 1999-2011. It defines country's short-run and long-run sustainability conditions that are based on dynamics of both sources created by an economy through net export surplus and negative net yields paid from international investment position. The paper points out important differences between large advanced and small transitive economies in case of costs of net investment position. The factors like country's position of FDI lender/debtor, world investment/ invoicing currency, exogeneity of foreign asset's and liability's interest yields, role of FX reserves accumulation by country's central bank and position of foreign currency denominated loans on foreign liabilities are discussed. Empirical analysis confi rms the Czech economy is not able to satisfy long run sustainability condition due to high net costs of negative investments position. Estimation of parameters in econometric model shows that worsening net investment position to GDP is a result of high dividend and interest yields paid from foreign liabilities that is still above positive balance of net export.

The article is focused on the analysis of export performance of the German economy, including the model scenarios that illustrate the transmission of shocks to the external environment of the Germany into the Czech economy. The analysis is motivated by the fact that the German economy is by far the largest trading partner of the Czech Republic since its establishment in 1993 and that Germany plays the role of an economic "locomotive" in the broader European region.

This paper provides a theoretical framework for a thesis that the transition to the inflation targeting regime, either explicit or implicit, may be one of the causes of the long-term latent accumulations of the financial and structural imbalances, materializing much later and with more dire consequences. Due to the long-term systematic manipulation of interest rates, within the operational framework of the stabilization of consumer prices and the output gap, as well as of anti-deflationary fundamentalism, the economy can transform itself into a kind of "black box", gradually and over time causing an "escape" of credit and monetary aggregates. Money supply tends to be more endogenous and elastic, changing the causality within a link between the money supply and its effective economic materialization, both in production processes of the real economy as well as in banking and financial services. Thereby, the economy lacks a needful defensive mechanism that would pull the overheating economy back through more exogenous and inelastic money supply, automatically adjusting market interest rates. In the empirical part we employed VECM tests to show that the money supply was exogenous before the implicit adoption of inflation targeting in the USA (1985), but endogenous after it.

The authors of the paper discuss reasons as well as current stage of the regulation of the financial (mostly banking) sector. They are not in favor of strict rejection of the regulation, but they are not in favor of strong regulation of the financial sector either. The article is based on the economic theory that there are objective economic reasons as well as specific financial features which cannot recommend and provide clear, simple, and unilateral solution about what level of regulation is appropriate in the financial market. The authors offer some economic ideas that can be useful for preparing and evaluating new regulation of the banking sector. The paper also defines theoretical assumptions of an ideal financial system. Based on those assumptions, the authors formulate and describe problems of real working financial (banking) system, and these problems create necessary condition, but not sufficient condition for imposing regulation. Finally, the paper describes and discusses impacts of concrete new banking regulatory proposals (increasing capital requirements, creating conservation and countercyclical capital buffers, calculating leverage ratio and liquidity ratio, and imposing bank levy).

An assumption that a central bank can influence the real interest rates is the object of our interest. In the paper we form and solve a model which corresponds to Romer's (2000) assumptions. Our model is IS-LM augmented by a conception of price-adjusting after monetary intervention and inflation expectations. A monetary policy rule is derived from the model. Moreover, it offers a demonstration of economic behaviour by different economic assumptions of different economic schools, similar to one in the book of Heijdra (2002).

The relatively long term period of stability before the present crises called even "Great Moderation" or "Golden Age of Central Banking" indicated that the infl ation targeting was a success story. As of 2008 a lot has changed and the debate over "Leaning against the wind or Clean afterwards?" is being revisited among central bankers and academicians. At the same time the question "Does money matter in monetary policy" is on the table again. This paper focuses on the discussion of these issues; moreover, some new challenges that emerged in previous three years are discussed. The crisis has highlighted an urgent need to incorporate banks and financial frictions into monetary policy modelling framework - therefore some new findings on this field of research are outlined. An important lesson from the crises is that price stability is not a sufficient precondition for financial stability, therefore an operational framework for financial stability is being searched - this is subject of the final part of this paper.

Learning process is a new approach of filling the gap between adaptive expectations and rational expectations. Private agents are learning new information and adjust their expectation about the inflation and output gap. Central bank transparency is one of the key factors of learning by private agents. However the learning process is also very important aspect for central bankers to improve their credibility.

The article deals with the relationship of post-Keynesian economics to new consensus as a theoretical framework of inflation targeting. First, new consensus with its roots in Wicksell's approach is briefly introduced. In the next parts differences and meeting-points of new consensus and post-Keynesian economics are discussed. Among the main similarities is identified: short term interest rate management, endogeneity of monetary base, endogeneity of money supply. But a lot of basic differences are found (goals of monetary policy, interest rate functions, nature of inflation, shape of Phillips curve and others). As a result, on the general level new consensus and post-Keynesian economics seem to be rather incompatible.

The paper discusses the phenomenon of long-term real equilibrium appreciation of the koruna in the context of economic, i.e. nominal and real convergence. The real appreciation can take place either through a nominal exchange rate channel or through inflation differential channel vis-á-vis the reference country, or through a combination of those two channels. However, the choice of monetary policy regime predetermines the occurrence and intensity of those channels. Subsequently, the paper summarizes the sources of equilibrium real appreciation, i.e. Balassa-Samuelson effect, the effect of terms of trade, FDI inflows, the impact of changes in the structure of domestic consumption and the effect of state administrative prices. It also presents range of models which are applicable for estimation of equilibrium (real) exchange rate. Finally, the paper presents and discusses trajectory of equilibrium real appreciation resulting from models of the CNB (QPM, g3 and others).

This paper examines definitions and assessments of central bank aggressiveness. It shows theoretical reasons why there is certain minimal threshold value if CB wants to stabilize price level and on the other hand, why excessive reactions are suboptimal. The empirical part suggests that aggressiveness could be measured by defining certain indicators, based on variability of interest rates, inflation and output gap. The results are reported for countries with independent monetary policy as well as for countries in the eurozone, which has handed their monetary independency to ECB.

In the course of exchange rate development history of the countries taking part and evaluated in ERM or ERM II before they entered the euro-area there was no depreciating evolution with a trend to currency crisis at all. Fundamental indicators of these economies, partly owing to the compliance with other Maastricht criteria, do not induce devaluation expectancions of investors. However, there is a danger in two other lines. Firstly there is the possibility of so called pure contagion, secondly there are specifics connected directly with taking part in ERM II (wrong configuration of the central parity, appreciating exchange rate overshooting or advancing the date of the euro conversion). The second generation models of currency crisis admits the risk of crisis even without an outstanding decline of fundamental indicators. Taking part of exchange rate in ERM II is a suitable application of the model. Under specific conditions, when taking part in ERM II should trend to the compliance with the exchange rate convergency criterion at the same time, there is a small expectancy of a speculative attack success.

Czech economy has recently accelerated the real economic convergence to the European average. Nevertheless, in terms of price convergence the Czech economy is still lagging behind the expected dynamics, which should theoretically respond to the pace of relative economic growth. This asymmetry may (as one of many other factors) contribute to some difficulties in stabilizing Czech inflation during the two-years transition period before accession to the Euro-zone, when price convergence criterion and exchange rate stability criterion should be simultaneously met. The paper points out selected issues of the Czech nominal convergence dynamics and emphasizes possible negative impacts of restrictive monetary policy measures (pushing for low inflation rate and stable exchange rate vis-à-vis euro) on the real growth of the Czech economy. In this respect, the paper tries to find some lessons from Slovenian and Greek approach for the arrangement of the Czech monetary policy in the pre-accession period.

The paper evaluates some policy dilemmas the Czech monetary policy will face on the way towards adopting common currency. The assessment of the inflation criterion concentrates on the potential clash with so called real convergence showing that alleged negative influences on the catching-up process seem to be exaggerated. The reasons leading to some scepticism about the ERM-II arrangement are further explained with distinction placed on eligibility and regime selection motives when applying for the ERM-II membership. Finally, the pros and cons of inflation targeting are discussed from the perspective of promoting the fulfilment of Maastricht requirements. Attention is paid to the issue of optimal exit form inflation targeting having in mind the priority of entering Eurozone with a proper conversion rate.

The article is concerned with analysis of independence of central banks of the EU Member States within the framework of the ESCB, as well as independence and responsibility of the ECB, and suggests an alternative institutional embodiment of its position, reflecting the specific framework of the EMU. The system of selection of members of the ECB's Executive Board blurs a real collective responsibility towards Member States, which opens possibilities for nontransparent lobbyism. Modified system is suggested so that national bank's governors have a symbolic relationship to the political representation, i.e. that they reflect a national economic policy in some way, without being bound and restricted by its formation whatsoever.

The study deals with analysis of economic reforms in South-Eastern Asia affected by financial crisis in 1990s. Authors have stressed, that it was a result of internal and external influences, which caused not only the fatal destabilization of main economic fundaments of affected countries and they have had consequences on international business authority of these countries. It was approved, that the high rate of internal interdependence of countries affected by crisis and also the interdependence on Japan, could be considered as basic, but hidden accelerators of crisis. Nevertheless using of important reforming interventions eliminated most of the economic implications of it the risks of re-outbreak of the crisis have been decreased to certain level only. For prevention against its expansion are responsible all "attended" subjects and equally they have to share on realization of reforming economic programs for its long-term elimination.

The goal of this article is to explain why central banks undershoot their inflation targets as we can observe also in the case of the Czech Republic. In other words, I am trying to find out if this undershooting is due to unpredictable desinflation shocks or due to asymmetric behaviour of central banks. Specifically, positive deviations from the target (i.e. overshooting) are weighted more in central bank"s loss function than the negative ones. It is shown that the Czech National Bank is asymmetric in its preferences but not so much as in the case of Canada, Sweden and the United Kingdom. On the other hand, some part of undershooting attributes to desinflation shocks hitting the Czech economy.

The paper discusses the issue of impossible trinity and its potential threat for Central and Eastern European countries operating under an inflation-targeting regime during the convergence process before entering the euro area. The threat of monetary policy inconsistency (the impossible trinity) consists of a conflict of the two monetary aims - the criterion of internal price stability and external stability of exchange rates. Providing study on monetary development in Hungary in 2003, as the National Bank of Hungary fought against the speculative attack on a strong edge of the Hungarian forint's fluctuation band. However, Bank's lowering the interest rates significantly together with consequent impacts on internal stability can be considered as monetary policy inconsistency.

The ECB concept of analysis of deviation of actual money stock development from its long run equilibrium development is based on the assumption that bigger deviation signalizes risks for the price stability. The ECB considers three measures of this deviation: nominal money gap, real money gap and monetary overhang/shortfall. The calculation of gap between the actual and the equilibrium development of money stock in nominal and real expression is not reasonable at the present time in Czech Republic. The calculation of monetary overhang/shortfall, which is based on the long run equilibrium value of money stock given by model of money demand, seems to be more employable.

The paper consists of four parts each of them devoted to a practical aspect of inflation targeting as conducted by the Czech National Bank. The first part outlines the reasons that led to the adoption of this monetary regime and summarises other advantages for effective and transparent decision-making. The second part addresses the issue of missing inflation targets. It is argued that simple confrontation of targets with actual behaviour of inflation may give a distorted view about the actual performance of monetary policy. The third part discusses a subtle methodological controversy about the difference between so-called escape clauses on the one hand and net inflation on the other. In the last section the author presents his critical view about the role of unconditional forecast in its capacity to indicate future interest rate decisions and to provide a realistic description of transmission mechanism in a small open economy.

The post-Keynesian approach to the nature of money brings some other conclusion to the monetary policy, independence of a central bank and function of commercial banks. The source money is created by demand of businessmen especially. Loans create deposits, deposits create reserves. Central bank plays two roles: lender of last resort and inflation supervisor. Creditting by commercial banks and their credit policy in post-Keynesian economics is considered as credit rationing. If the role of central bank - lender of last resort - is not connected with changes of regulation, which reduce new practice of financial markets to avoid regulation, the influence of central bank to fight with inflation declines. Post-Keynesian economics is not directed against competence and independence of central bank. On the contrary, it welcomes the more direct influence of central bank on commercial banks and other financial institutions, however, with use of alternative limiting facilities.