Essays on Monetary Policy

This thesis deals with topics related to monetary policy in general. The dissertation consists of three chapters. The first chapter focuses on the role of monetary policy in resource-rich developing countries from a theoretical perspective. The second chapter empirically analyses the determinants of the choice of exchange rate regime in resource- rich countries. The third chapter studies the monetary transmission channels in the Czech Republic by using micro-level data. In the first chapter we construct a DSGE model for a small, open economy to show that if fiscal indiscipline, in the form of immediate responses to foreign resource revenue changes is inevitable, then monetary policy can help improve the allocation problem. The simulation results indicate that targeting the exchange rate or price level, through foreign exchange interventions by the central bank, can soften the negative effects of Dutch Disease and stabilize the economy in the face of volatile natural resource revenues in the short run. We also find that a fixed exchange rate regime outperforms price level targeting by delivering higher isolation and hence less vulnerability to shocks in natural resource revenues. In contrast, if the central bank chooses to pursue a laissez faire policy, i.e., not to intervene, then the economy becomes..

The Impact of Monetary Policy on Financing of Czech Firms

This paper uses firm-level financial data for Czech firms and tests for the role of companies’ financial structure in the transmission of monetary policy. Our results indicate that higher short-term interest rates coincide with lower shares of total debt, short-term bank loans, and long-term debt. We find that firm-specific characteristics, such as size, age, collateral, and profit, affect the way in which monetary policy changes are reflected in the external financing decisions of firms. These findings indicate the presence of informational frictions in credit markets and hence provide some empirical evidence of the existence of broad credit and relationship lending channels in the Czech Republic

Six Ways Population Change Will Affect the Global Economy

New estimates of economic flows by age combined with population projections show that in the coming decades (1) global GDP growth could be slower by about 1 percentage point per year, declining more sharply than population growth; (2) GDP will shift toward sub-Saharan Africa more than population trends suggest; (3) living standards of working-age adults may be squeezed by high spending on children and seniors; (4) changing population age distribution will raise living standards in many lower-income nations; (5) changing economic life cycles will amplify the economic effects of population aging in many higher income economies; and (6) population aging will likely push public debt, private assets, and perhaps productivity higher. Population change will have profound implications for national, regional, and global economies