Unconventional monetary policy in a small open economy under inflation targeting regime

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F17%3A00099556" target="_blank" >RIV/00216224:14560/17:00099556 - isvavai.cz</a>

Výsledek na webu

<a href="http://fim2.uhk.cz/mme/conferenceproceedings/mme2017_conference_proceedings.pdf" target="_blank" >http://fim2.uhk.cz/mme/conferenceproceedings/mme2017_conference_proceedings.pdf</a>

DOI - Digital Object Identifier

—

Jazyk výsledku

angličtina

Název v původním jazyce

Unconventional monetary policy in a small open economy under inflation targeting regime

Popis výsledku v původním jazyce

In this paper, we focus on consequences of unconventional monetary policy, namely, of interventions on foreign exchange (FX) market. In recent development of many economies, interest rate hit the zero lower bound, making traditional instrument of monetary policy unemployable. Depreciation of country’s currency and subsequent interventions on FX market therefore provide for an option for inflation targeting in small open economies. We use a New-Keynesian dynamic stochastic model of general equilibrium. The possibility of central bank’s interventions is modeled by adding a segment of FX dealers as a modified uncovered interest parity condition, according to Montoro´and Ortiz (2013). The model is then estimated on data of Czech economy. We then introduce non-linearities to otherwise linear model, providing a way to model constraints on variables. Constraint on interest rate is chosen to model the position of the economy at zero lower bound, whereas constraint on exchange rate is used to model commitment of central bank to keep exchange rate above certain value. Model is solved using toolbox of Dynare , which introduces a way of dealing with non-linear models, by assuming perfect foresight of agents. Finally, the results are assessed and correctness of unconventional monetary policy is evaluated.

Název v anglickém jazyce

Unconventional monetary policy in a small open economy under inflation targeting regime

Popis výsledku anglicky

In this paper, we focus on consequences of unconventional monetary policy, namely, of interventions on foreign exchange (FX) market. In recent development of many economies, interest rate hit the zero lower bound, making traditional instrument of monetary policy unemployable. Depreciation of country’s currency and subsequent interventions on FX market therefore provide for an option for inflation targeting in small open economies. We use a New-Keynesian dynamic stochastic model of general equilibrium. The possibility of central bank’s interventions is modeled by adding a segment of FX dealers as a modified uncovered interest parity condition, according to Montoro´and Ortiz (2013). The model is then estimated on data of Czech economy. We then introduce non-linearities to otherwise linear model, providing a way to model constraints on variables. Constraint on interest rate is chosen to model the position of the economy at zero lower bound, whereas constraint on exchange rate is used to model commitment of central bank to keep exchange rate above certain value. Model is solved using toolbox of Dynare , which introduces a way of dealing with non-linear models, by assuming perfect foresight of agents. Finally, the results are assessed and correctness of unconventional monetary policy is evaluated.

Druh

D - Stať ve sborníku

CEP obor

—

OECD FORD obor

50202 - Applied Economics, Econometrics

Projekt

—

Návaznosti

S - Specificky vyzkum na vysokych skolach

Rok uplatnění

2017

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název statě ve sborníku

35th International Conference Mathematical Methods in Economics MME 2017 Conference Proceedings

ISBN

9788074356780

ISSN

—

e-ISSN

—

Počet stran výsledku

6

Strana od-do

177-182

Název nakladatele

Faculty of Informatics and Management, University of Hradec Králové

Místo vydání

Hradec Králové

Místo konání akce

Hradec Králové

Datum konání akce

1. 1. 2017

Typ akce podle státní příslušnosti

WRD - Celosvětová akce

Kód UT WoS článku

000427151400031