## Scenario Analysis for the Czech Republic: Using the Integrated Policy Framework (IPF)

_Selected Issues Papers, April 23, 2026_

## Source details

**Canonical URL:** [Scenario Analysis for the Czech Republic: Using the Integrated Policy Framework (IPF)](https://www.imf.org/en/publications/selected-issues-papers/issues/2026/04/23/scenario-analysis-for-the-czech-republic-using-the-integrated-policy-framework-ipf-575602)

## Other formats

- [Markdown version](/en/publications/selected-issues-papers/issues/2026/04/23/scenario-analysis-for-the-czech-republic-using-the-integrated-policy-framework-ipf-575602/index.md)
- [Structured JSON version](/en/publications/selected-issues-papers/issues/2026/04/23/scenario-analysis-for-the-czech-republic-using-the-integrated-policy-framework-ipf-575602/index.json)
- [Bundle manifest](/en/publications/selected-issues-papers/issues/2026/04/23/scenario-analysis-for-the-czech-republic-using-the-integrated-policy-framework-ipf-575602/bundle-manifest.json)

## Bibliographic details
- Authors: Thomas P Gade, Jesper L Linde, Lukas Boer
- Published: April 23, 2026
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798229044455.018

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### Scope and methodology
- Applies the IMF’s Integrated Policy Framework (IPF) to the Czech Republic to support use of scenario analysis at the Czech National Bank (CNB).
- Uses an extended version of the QIPF model to broaden analysis beyond traditional external shock scenarios to also include:
  - domestic fiscal policy shocks
  - central bank balance sheet normalization

### Key frictions and behavioral assumptions
- Identifies shallowness of FX markets as the main relevant friction under the IPF.
- Notes that inflation expectations are generally well anchored, but "they can nevertheless deviate from the inflation target for extended periods."

### Main findings
- In the event of a global risk-off outflow shock, the CNB can improve macro stabilization through a combined use of reserves and interest rate policy.
- Refocusing fiscal stimulus towards more productive uses greatly reduces the degree of monetary policy tightening needed to stabilize inflation at target.
- Balance sheet normalization is optimally implemented in a preannounced and gradual manner; potential currency appreciation can in principle be mitigated through a slightly lower policy rate.

### Policy implications and recommendations
- Combine foreign reserve management with interest rate policy to enhance macro stabilization during global risk-off outflow shocks.
- Reorient fiscal stimulus toward more productive spending to lessen the required monetary policy tightening for inflation stabilization.
- Implement balance sheet normalization via preannouncement and gradualism; consider a slightly lower policy rate as a tool to mitigate potential currency appreciation during normalization.

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## Content in this bundle

- **Robustness Check of FX Market Shallowness**
  - [Robustness Check of FX Market Shallowness (Markdown version)](/-/media/files/publications/selected-issues-papers/2026/english/sipea2026034.pdf.md){rel="alternate" type="text/markdown"}
  - [Robustness Check of FX Market Shallowness (PDF)](/-/media/files/publications/selected-issues-papers/2026/english/sipea2026034.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/selected-issues-papers/issues/2026/04/23/scenario-analysis-for-the-czech-republic-using-the-integrated-policy-framework-ipf-575602_