{
  "title": "Did the Exchange Rate Floor Prevent Deflation in the Czech Republic?",
  "publication": "IMF Working Papers, September 20, 2017",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2017/09/20/did-the-exchange-rate-floor-prevent-deflation-in-the-czech-republic-45249",
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  "summary": "To fight deflationary pressures at the zero lower bound, in November 2013, the Czech National Bank (CNB) introduced a one-sided floor on the exchange rate, as an additional monetary policy instrument.",
  "sections": [
    {
      "heading": "Summary and main finding",
      "content": "- To fight deflationary pressures at the zero lower bound, in November 2013, the Czech National Bank (CNB) introduced a one-sided floor on the exchange rate as an additional monetary policy instrument.\n- The paper investigates the impact of the FX floor on inflation in the Czech Republic by comparing actual inflation with counterfactuals in the absence of the exchange rate floor.\n- Empirical results provide evidence that the exchange rate floor was effective in fighting deflationary pressures and prevented inflation from going into negative territory.\n- The magnitude of the effect ranges between 0.5 to 1.5 percentage points.\n- The results are robust to different econometric specifications."
    },
    {
      "heading": "Empirical strategies implemented",
      "content": "- Event study.\n- Difference-in-difference regressions.\n- Synthetic control method."
    },
    {
      "heading": "Substantive findings and implications",
      "content": "- The FX floor helped prevent deflation at the zero lower bound by supporting inflation outcomes relative to counterfactual scenarios without the FX floor.\n- The estimated impact on inflation is quantified as between 0.5 to 1.5 percentage points across specifications.\n- Robustness: results hold across different econometric specifications and the three distinct empirical approaches."
    },
    {
      "heading": "Subject areas and keywords (as listed)",
      "content": "- Subject: Exchange rates, Foreign exchange, Foreign exchange intervention, Inflation, Inflation targeting, Monetary policy, Prices\n- Keywords: CNB FX operations, core inflation in the Czech Republic, exchange rate, Exchange rates, Foreign exchange intervention, FX floor, FX intervention, Global, import price inflation, Inflation, inflation expectation, Inflation targeting, inflation-unemployment relationship, synthetic control method, WP\n\n---\n\n Content in this bundle\n\n- Did the Exchange Rate Floor Prevent Deflation in the Czech Republic?, WP/17/206, September 2017\n  - Did the Exchange Rate Floor Prevent Deflation in the Czech Republic?, WP/17/206, September 2017 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Did the Exchange Rate Floor Prevent Deflation in the Czech Republic?, WP/17/206, September 2017 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2017/09/20/did-the-exchange-rate-floor-prevent-deflation-in-the-czech-republic-45249"
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    "Authors: Francesca Caselli",
    "Published: September 20, 2017",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484319291.001",
    "To fight deflationary pressures at the zero lower bound, in November 2013, the Czech National Bank (CNB) introduced a one-sided floor on the exchange rate as an additional monetary policy instrument.",
    "The paper investigates the impact of the FX floor on inflation in the Czech Republic by comparing actual inflation with counterfactuals in the absence of the exchange rate floor.",
    "Empirical results provide evidence that the exchange rate floor was effective in fighting deflationary pressures and prevented inflation from going into negative territory.",
    "The magnitude of the effect ranges between 0.5 to 1.5 percentage points.",
    "The results are robust to different econometric specifications.",
    "Event study.",
    "Difference-in-difference regressions.",
    "Synthetic control method.",
    "The FX floor helped prevent deflation at the zero lower bound by supporting inflation outcomes relative to counterfactual scenarios without the FX floor.",
    "The estimated impact on inflation is quantified as between 0.5 to 1.5 percentage points across specifications.",
    "Robustness: results hold across different econometric specifications and the three distinct empirical approaches.",
    "Subject: Exchange rates, Foreign exchange, Foreign exchange intervention, Inflation, Inflation targeting, Monetary policy, Prices",
    "Keywords: CNB FX operations, core inflation in the Czech Republic, exchange rate, Exchange rates, Foreign exchange intervention, FX floor, FX intervention, Global, import price inflation, Inflation, inflation expectation, Inflation targeting, inflation-unemployment relationship, synthetic control method, WP",
    "**Did the Exchange Rate Floor Prevent Deflation in the Czech Republic?, WP/17/206, September 2017**"
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