David Vavra

The Czech Economic Transition: Exploring Options Using a Macrosectoral Model

The processes that will drive the next stage of the Czech transition are likely to be similar to those promoting real convergence in the EU cohesion countries. We draw on previous modelling research on the cohesion economies to construct and calibrate a small macrosectoral model of the Czech Republic that serves to highlight key policy issues facing CEE-country decision-makers. Four scenarios are then explored by simulation: the first projects the current pattern of disequilibrium wage setting into the future, while a second looks at the consequences of labour market reform. The other scenarios highlight some of the differences between policy strategies based on indigenous versus FDI-driven export-led growth.

The Czech Economic Transition

The processes that will drive the next stage of the Czech transition are likely to be similar to those promoting real convergence in the countries of the EU periphery. We draw on previous modeling research on these latter economies to construct and calibrate a small macrosectoral model of the Czech Republic. Model simulations explore some key policy issues facing CEE-country decision-makers: labour market reforms, disinflation and industrial development. Our analysis suggests that much can be learned from the experience of countries like Ireland and Portugal which have converged substantially towards EU average living standards.

Frontiers of Monetary Policymaking; Adding the Exchange Rate as a Tool to Combat Deflationary Risks in the Czech Republic

The paper first describes how the Czech National Bank (CNB) moved gradually from a fixed exchange rate regime to the frontiers of Inflation-Forecast Targeting. It then focuses on the CNB’s recent experience in adding the exchange rate as a complementary monetary policy tool to stimulate the economy and combat the risks of deflation when the policy interest rate is at the zero lower bound. It assesses the theoretical basis of such a policy, the communications approach used by the CNB when announcing the new framework, and the effects thus far on inflation and output.

Morocco: A Practical Approach to Monetary Policy Analysis in a Country with Capital Controls

The Central Bank of Morocco has been working on developing a Forecasting and Policy Analysis System (FPAS) to support a gradual move toward a more flexible exchange rate regime and the eventual adoption of a full-fledged inflation-targeting (IT) regime. At the center of the FPAS is a quarterly projection model that was tailored for two different types of exchange rate regimes. Presently, the fixed exchange rate model version is to be used during the pre-IT period, while the flexible exchange rate model version is to be used to prepare alternative scenarios for monetary policy decision makers to discuss the potential policy implications of shocks under an IT regime.

The Czech Republic on its Way to the Euro: A Stabilization Role of Monetary Policy Revisited

The Euro and Economic Stability assesses the euro area’s merits as a shelter and the merits of euro assets as a safe haven and reviews the case for rapid euro adoption from a post-crisis view. Policymakers and economists provide relevant lessons from euro area divergences for future euro area members and, more generally, from the financial crisis, while banking representatives discuss post-crisis business models of banks in the area. Last but not least, a theoretical introductory chapter fills the gap between mainstream macroeconomic modelling and real-world decision-making.