Challenges to Monetary Policy in the Czech Republic—An Integrated Monetary and Fiscal AnalysisThis paper uses the Global Integrated Monetary and Fiscal Model (GIMF), a New Keynesian open-economy general equilibrium model suitable for an integrated evaluation of monetary and fiscal policies, to analyze monetary policy challenges facing the Czech Republic. In the context of the recent rising inflation pressures, we analyze how the authorities' fiscal reform package and the planned reduction in the inflation target in 2010 would weigh on the conduct of monetary policy. |
Contents
Introduction | 3 |
Effect of the Fiscal Shock on Headline Inflation | 9 |
Macroeconomic Effects of Reducing the Inflation Target | 15 |
Copyright | |
Common terms and phrases
1.0 All Taxes 1.5 All shocks 1.5 Fiscal Package 1.5 in point 1.5 Output Gap 2.0 in percentage account by monetary Appendix Figure base point difference Benefits 1.0 Benefits Fiscal Package Capital in Tradable core inflation Czech National Bank Czech Statistical Office Debt to GDP Depreciation shocks effects are included ERM II fiscal policies Fiscal Shock Gap Depreciation Wage GDP difference headline inflation IMF staff estimates impact increase inflation 1.0 inflation All shocks inflation Expected inflation Inflation in percentage inflation indicator taken inflation target Inflation Tax International Monetary Fund koruna Koruna depreciation Labor in Tradable macroeconomic Monetary and Fiscal monetary policy Nominal Interest Rate Output Gap Depreciation parameters percentage difference percentage point difference PIT VAT point of GDP Rate in base Rate in percentage Real Exchange Rate Real Interest Rate round effects Shocks and Reduction Source taken into account Unexpected inflation 1.5 Unexpected inflation Expected VAT hike Wage and Depreciation