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Volume 67, Issue 6


Quantifying the Effects of the CNB's Exchange Rate Commitment: A Synthetic Control Method Approach

Opatrny, Matej

Year: 2017   Volume: 67   Issue: 6   Pages: 539-577

Abstract: In this paper I evaluate the quantitative effects of the Czech National Bank’s commitment to keep the Koruna from appreciating that were put in place in 2013. I focus on the policy’s impact on output, unemployment, and inflation. I use the synthetic control method, which allows me to compute the counter-factual development of the Czech economy in the absence of the commitment. I find that the commitment helped decrease unemployment substantially. The effect on overall output is also strongly positive, almost 2 percentage points for growth in 2015, but only marginally statistically significant, which might be connected to disturbances created by changes in excise taxes. The effect of the commitment on inflation is positive but not statistically significant at standard levels.

JEL classification: E42, E47, E50

Keywords: inflation, unemployment, output, monetary policy, synthetic control method

RePEc: https://ideas.repec.org/a/fau/fauart/v67y2017i6p539-577.html

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