Frontiers of Monetary Policymaking: Adding the Exchange Rate as a Tool to Combat Deflationary Risks in the Czech Republic
April 1, 2015
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Summary
The paper first describes how the Czech National Bank (CNB) moved gradually from a fixed exchange rate regime to the frontiers of Inflation-Forecast Targeting. It then focuses on the CNB’s recent experience in adding the exchange rate as a complementary monetary policy tool to stimulate the economy and combat the risks of deflation when the policy interest rate is at the zero lower bound. It assesses the theoretical basis of such a policy, the communications approach used by the CNB when announcing the new framework, and the effects thus far on inflation and output.
Subject: Banking, Central bank policy rate, Exchange rate policy, Exchange rates, Financial services, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Prices
Keywords: central bank, central bank communications, Central bank policy rate, CNB policymaker, CNB staff, commitment of the CNB, deflation, Exchange rate policy, exchange rate tool, Exchange rates, forward guidance, forward-looking policymaking framework, Global, Inflation, Inflation Targeting, Inflation-Forecast Targeting, interest rate, interest rate path, transmission mechanism, WP, zero lower bound
Pages:
44
Volume:
2015
DOI:
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Issue:
074
Series:
Working Paper No. 2015/074
Stock No:
WPIEA2015074
ISBN:
9781475532371
ISSN:
1018-5941
