Work detail

The impact of CNB's exchange rate commitment on Czech exports

Author: Mgr. Jiří Teichman
Year: 2019 - winter
Leaders: Mgr. Michal Paulus
Work type: Finance, Financial Markets and Banking
Language: English
Pages: 156
Awards and prizes:
Abstract: The thesis evaluates the effect of Czech National Bank’s exchange rate commitment on Czech sectoral exports. Thus, we show how unconventional monetary
policies could affect the exports. To assess the impact of interventions, we use
Synthetic Control Method. The method constructs synthetic Czech exports
from data of comparable countries that were not under the policy of interest and compares them to observed Czech exports following the interventions.
We expect a positive effect of Czech National Bank’s commitment on Czech
exports, because the interventions resulted in the undervaluation of koruna
causing a higher demand for Czech goods abroad. Additionally, the exporters
should benefit from reduced uncertainty caused by no exchange rate volatility
with the euro area. The results showed a positive impact of interventions only
in half of the export sectors. The positive effect of a stable exchange rate is
not confirmed, because the effect on the euro area countries in some categories
was smaller than for the other countries. The results for total sectoral exports
were stable across model specifications and confirmed by analysis of Czech bilateral sectoral exports to the largest destinations. The significant contribution
of this thesis is application of Synthetic Control Method on total sectoral exports, which was not done before. The method performed well, therefore it
gives researchers a useful tool for evaluating the impact of policies and events
on exports.




Patria Finance
Česká Spořitelna