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Monetary Policy Transmission Mechanisms in the Central and Eastern European Countries

100%

Shevchuk V.

Argumenta Oeconomica Cracoviensia

2020

issue 2(23)

51-68

Objective: The aim of this study is to examine monetary policy transmission mechanisms in four Central and Eastern European countries (the Czech Republic, Hungary, Poland and Romania), in the presence of fiscal and exchange rate effects. Research Design & Methods: We implement a structural vector autoregression (SVAR) approach for modelling the interdependencies between monetary and fiscal policies, output gap and consumer price inflation (CPI). In our six-variable model, which includes the budget balance, the output gap, CPI, the central bank reference rate, the lending rate and the real exchange rate (RER), short-run restrictions on the contemporaneous structural parameters imply that the budget balance responds to changes in the output gap and lending rate, while the central bank reference rate is a function of output and inflationary shocks. Findings: The results of our research show that the effects of an increase in the central bank’s short-run interest rate on inflation, output gap and the RER are quite heterogeneous across the CEE countries. As the monetary policy response to inflation seems to be significant and rather uniform across countries, though with a different time pattern, there is no evidence of its reaction to the output gap (except for Romania in the long run). Among other results, budget surplus has a strong anti-inflationary impact in all countries but at the expense of a short-lived output slowdown (except for Hungary). The RER undervaluation is likely to stimulate output (Romania) or depress it (Poland), with a neutral stance in the two other countries. As expected, an increase in the lending rate is followed by a fall in output on impact, while there is no significant effect on inflation. Implications/Recommendations: Our study argues in favour of a much stronger response of the central bank reference rate to the output gap in the CEE countries. As suggested by the experience of Poland, an immediate response of the central bank to inflation could explain the lack of the price puzzle when an increase in the reference rate is associated with a sustained increase in consumer prices. An anti-inflationary monetary policy stance should be strengthened by fiscal tightening, while in a recession a higher budget deficit is likely to boost output and prevent a deflationary spiral. Contribution: The article presents the application of the extended IS-MP-IA model to the modelling of monetary policies by the central banks of the CEE countries that practice a floating exchange rate regime.

Zdezagregowany wskaźnik inflacji w polityce pieniężnej banku centralnego

72%

Hałka A.

Wiadomości Statystyczne. The Polish Statistician

2017

issue 1

26-40

Celem artykułu jest przedstawienie wyników badań zdezagregowanego wskaźnika cen w ocenie procesów inflacyjnych na przykładzie Polski. Prezentowane analizy wskazują, że podejście zdezagregowane pozwala na pełniejsze zrozumienie charakteru procesów cenotwórczych oraz na lepszą identyfikację czynników wpływających na kształtowanie się inflacji. Wyniki wskazują na trzy wnioski. Po pierwsze, znaczna część inflacji w Polsce jest uzależniona od czynników krajowych. Po drugie, nie należy utożsamiać wskaźnika inflacji bazowej z miarą presji popytowej w gospodarce. Po trzecie, zestaw czynników zewnętrznych kształtujących procesy cenotwórcze w Polsce jest stosunkowo szeroki i odmienny dla różnych komponentów wskaźnika cen.

This article aims at presenting the results of the research concerning disaggregated price index in the assessment of inflation processes in Poland. Presented analysis shows that disaggregated approach allows for a fuller understanding of the nature of the price-setting process and better identification of factors affecting inflation. The results indicate three conclusions. Firstly, a significant part of the inflation in Poland is dependent on domestic factors. Secondly, the core inflation rate should not be equated with the measure of demand pressures in the economy. Thirdly, a set of external factors affecting the price-setting process in Poland is relatively wide and distinct for different components of the price index.

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1 Argumenta Oeconomica Cracoviensia

1 Wiadomości Statystyczne. The Polish Statistician

1 Hałka A.

1 Shevchuk V.

1 2020

1 2017

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Monetary Policy Transmission Mechanisms in the Central and Eastern European Countries

Zdezagregowany wskaźnik inflacji w polityce pieniężnej banku centralnego