Since 2014
Did the Exchange Rate Floor Prevent Deflation in the Czech Republic?
Review of Economics and Institutions
View Archive Info| Field | Value | |
| Title |
Did the Exchange Rate Floor Prevent Deflation in the Czech Republic?
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| Creator |
Caselli, Francesca; International Monetary Fund
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| Subject |
International Economics
Foreign exchange intervention, exchange rate, synthetic control method F31, E58 |
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| Description |
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. This 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. Three different empirical strategies are implemented: an event study, difference-in-difference regressions and a synthetic control method. The empirical results provide evidence that the exchange rate 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.
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| Publisher |
University of Perugia
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| Contributor |
—
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| Date |
2017-12-21
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Format |
application/pdf
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| Identifier |
http://www.rei.unipg.it/rei/article/view/252
10.5202/rei.v8i2.252 |
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| Source |
Review of Economics and Institutions; Vol 8, No 2 (2017); 31
2038-1379 2038-1344 |
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| Language |
eng
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| Relation |
http://www.rei.unipg.it/rei/article/view/252/176
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