Foreign exchange interventions under inflation targeting: the Czech Experience

This paper discusses the role of foreign exchange interventions in the inflation-targeting regime, focusing on the Czech experience since 1998. It concludes that the case for foreign exchange interventions is not clear in an inflation targeting regime both from the theoretical and empirical point of view. First, the stylised facts on the effectiveness of Czech interventions suggest that sometimes these might have had an effect lasting up to 2 or 3 months, but no strategy can be identified that would work in all episodes. Moreover, even many of the "successful" interventions were not able to prevent quite prolonged periods of exchange rate overvaluation in 1998 and in 2002. Second, the sterilisation costs of interventions are shown to have been quite substantial in the Czech Republic, which had in certain period affected their credibility and effectiveness. Third and most importantly, the interventions may lead to tensions with the philosophy of the inflation targeting regimes on the procedural and communication level, which might have a negative impact on the credibility of the policy regime. The paper proposes some criteria for assessing whether the interventions are not in a conflict with the inflation targeting regime, and applies these criteria to the Czech case. From an ex post view, all the intervention episodes are judged to be consistent with the inflation targets and output developments, but there may be some doubt in other respects concerning the intervention episodes in early-1998 and late-1999. --Exchange rate,foreign exchange interventions,inflation targeting,sterilisation

Price Convergence: What Can the Balassa-Samuelson Model Tell Us? (in English)

The article contributes to the theory of convergence in the price level and relative prices. The authors present a model integrating the Balassa-Samuelson model of real equilibrium exchange rate with a model of capital accumulation and with the demand side of the economy. They also show how the Balassa-Samuelson model can be extended to the case of more than two goods. The predictions of the Balassa-Samuelson model are generally consistent with empirical findings in Central and Eastern European countries. The authors show how the model can be used toward projecting price convergence in a transition economy.inflation; relative prices; Balassa-Samuelson model

Exchange Rate Arrangements Prior to Euro Adoption

This paper discusses the exchange rate policies in the three stages of the euro adoption process. In the first stage, i.e., after EU accession but before ERM II entry, the exchange rate becomes a matter of “common concern” according to the Treaty. The paper argues that in the modern conditions, this has no real meaning besides mutual consultations on macroeconomic policy issues. In the second stage, common concern becomes institutionalized under the ERM II mechanism. Its main advantages and risks are discussed, and the arguments for minimizing the length of this stage are presented. In the third step, the exchange rate stability criterion is assessed before the country is allowed to adopt the euro. The paper discusses the open issues in the interpretation of this criterion. Finally, the current state of the Czech euro adoption strategy is described.monetary integration, euro adoption, convergence criteria, ERM II

Seignorage and Central Bank Finance

The author of this paper criticizes the broad, cash-flow based concepts of seignorage that were introduced and emphasized by the economic literature of the 1990s (i.e., fiscal seignorage, total seignorage, etc.), which the author argues are ill justified and confusing. On the other hand, the two classical definitions of seignorage ? ie. monetary and opportunity cost seignorage ?are regarded as fully consistent and sufficient for theoretical purposes.The paper discusses the development of the classical concepts of seignorage in the Czech Republic since 1993. It shows that the fast growth of the monetary base in 1993-96 gave way to decline, above all due to reduced minimum reserve requirements. Monetary seignorage thus reached 1.2% of GDP in 1993-99 as a whole. Opportunity cost seignorage reached 1.4% of GDP in the same period. However, it was more than consumed by the central bank?s opportunity costs from holding foreign exchange reserves (associated with the existence of a risk premium on foreign exchange markets) and by the government's banking-sector bailouts.seignorage; central bank; monetary base; risk premium; public budgets

Inflation Target Fulfillment in the Czech Republic in 1998–2007: Some Stylized Facts

This paper provides some stylized facts of inflation target fulfillment in the Czech Republic in 1998–2007. In the first part, it discusses briefly the general macroeconomic conditions of the Czech inflation targeting regime, including an identification of the main shocks affecting its performance. The second part compares the extent of inflation target non-fulfillment in the Czech Republic with the experience of other inflation targeting countries. It turns out that the success rate in terms of inflation target fulfillment has changed over time. While in the early phase of inflation targeting the deviations of inflation from the CNB’s targets were high by international comparison, more recently the CNB has converged to the track record of relatively successful inflation targeting central banks.monetary policy, inflation targeting

Central Bank Losses and Economic Convergence

This paper discusses central bank losses and develops a formal framework for assessing the sustainability of its balance sheet. Analyzing the consequences of economic convergence in depth, it emphasizes the role played by the risk premium and equilibrium real exchange rate appreciation. A closed-form comparative-static analysis and also numerical solutions of the future evolution of the central bank’s own capital are presented. Applying this framework to an example of a converging economy, namely the Czech Republic, the authors find that the Czech National Bank should be able to repay its accumulated loss in about 15 years without any transfer from public budgets.balance sheet, central bank, economic convergence, monetary policy, real appreciation, risk premium, seigniorage, transition

Price Convergence toward the EU: A Few Open Issues

This article attempts to answer a few open questions related to price convergence in the Czech Republic and in other Central and Eastern European Countries toward prices in the European Union. The authors address the following issues: First, what, from the theoretical viewpoint, should the quantitative relationship be between price level and GDP? Second, does the existing empirical data allow for a clear distinction between tradable and non-tradable commodities, as assumed by standard theory? Third, what is the relationship between price levels and coefficient measuring differences in the structures of relative prices in individual countries? Fourth, what are the likely forms of relative price convergence in the Czech Republic toward accession to the European Union? Fifth, what is the reason for the significantly negative residual of the Czech economy in the cross-country regressions of the average price level on GDP.relative price differentiation; inflation; sticky prices; Balassa-Samuelson effect

Visual identity of an existing entity or non-profit organization.

Diplomová práce se zabývá vytvořením vizuální identity domu kultury Slavia. Vytvořená značka slouží prezencaci objektu jako kulturního centra a také všem jeho součástem. Restauraci, hudebnímu klubu a velkému sálu.ObhájenoThis diploma thesis creates a visual identity of the Slavia Culture center in the city of Ceske Budejovice. This brand as a whole is meant to present Slavia as an institution. And also creates sub-brands for all of its parts. A restaurant, a music bar and a large hall for various events