Exchange Rate Pass-Through to Domestic Prices: The Case of the Czech Republic
|Author:||Mgr. Jan Hájek|
|Year:||2014 - summer|
|Leaders:|| prof. Roman Horváth Ph.D.
|Work type:|| EEI & EP
|Awards and prizes:||M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance and for an extraordinarily good masters diploma thesis.|
|Abstract:||In this thesis, we examine the exchange rate pass-through phenomenon in the Czech Re-
public over 1998:1-2014:1 period. As our vector autoregression results indicate, short-term
pass-through efeect slowed down and prolongated its duration substantially. Consequently,
the accumulated value to be transmitted increased compared to previous findings. In the
case of exchange rate pass-through efeect to CPI, the accumulated response after 18 months
accounts for about 40-60 per cent. In this regard, our time-varying results using unique
Chebyshev Time Polynomials points to period 2008-2014 to be the leading cause. It seems
that during macroeconomically less stable periods the exchange rate pass-through in the
Czech Republic tends to increase. Even though the consensus on the pass-through lev-
els and its development over time is rather scarce, we find support for our conclusions.
More interestingly, having in mind November's currency interventions of the Czech Na-
tional Bank to weaken koruna (and thus avoiding de ation), our results reveal that this
measure has become much more efeective in the latest years (as consequence of the crisis)
than previous literature suggested. Following up on that, it seems that exchange rate
regained some of its rather historical importance while conducting monetary policy within
the Czech boundaries.