Tomas Holub

Convergence of Relative Prices and Inflation in Central and Eastern Europe

The paper assesses inflation risks resulting from the convergence of structures of relative prices in Central and Eastern European (CEE) countries toward the European Union (EU). The basic idea of the paper is that under low downward flexibility of domestic nominal prices, the adjustment of relative price structures is likely to lead to higher inflation. The authors find that the degree of differences in the structures of relative prices in transition economies vis-a-vis EU economies has a strong negative relationship to price levels in the transition economies. Based on their calculations, the authors assess the likely future inflationary pressures that can stem from the remaining differences between the structures of relative prices in the CEE economies and the EU. The authors argue that their approach can be thought of as an extension of the standard Balassa-Samuelson explanation of international variability in price levels.

Czech Magic; Implementing Inflation-Forecast Targeting at the CNB

This paper describes the CNB’s experience implementing an inflation-forecast targeting (IFT) regime, and the building of a system for providing the economic information that policymakers need to implement IFT. The CNB’s experience has been very successful in establishing confidence in monetary policy in the Czech Republic and should provide useful guidance for other central banks that are considering adopting an IFT regime.

An Index for Transparency for Inflation-Targeting Central Banks: Application to the Czech National Bank

This paper develops a new central bank transparency index for inflation-targeting central banks (CBT-IT index). It applies the CBT-IT index to the Czech National Bank (CNB), one of the most transparent inflation-targeting central banks. The CNB has invested heavily in developing a Forecasting and Policy Analysis System (FPAS) to implement a full-fledged inflation-forecast-targeting (IFT) regime. The components of CBT-IT index include measures of transparency about monetary policy objectives, the FPAS designed to support IFT, and the monetary policymaking process. For the CNB, all three components have shown substantial improvements over time but a few gaps remain. The CNB is currently working on eliminating some of these gaps.

Česká ekonomika v roce 2000: obrat v tempu růstu

The authors present an analysis of the most recent trends in the Czech economy. They claim that the economy is going through a turning point in its development: after two years of a decline, the economy is likely to grow again in 2000. The growth will be driven mainly by exports, followed by private household consumption. The authors expect that Czech exports will be positively influenced by an accelerating growth in the EU, but not to such an extent to compensate fully for the increase of Czech domestic demand. The imbalance of the current account will be covered with the record inflow of foreign direct investment in 2000. The authors also analyse the recent monetary policy and predict the development of inflation in the Czech Republic. They expect inflation to accelerate slightly again in 2000, but the Central Bank is still likely to undershoot its target for 2000.The authors present an analysis of the most recent trends in the Czech economy. They claim that the economy is going through a turning point in its development: after two years of a decline, the economy is likely to grow again in 2000. The growth will be driven mainly by exports, followed by private household consumption. The authors expect that Czech exports will be positively influenced by an accelerating growth in the EU, but not to such an extent to compensate fully for the increase of Czech domestic demand. The imbalance of the current account will be covered with the record inflow of foreign direct investment in 2000. The authors also analyse the recent monetary policy and predict the development of inflation in the Czech Republic. They expect inflation to accelerate slightly again in 2000, but the Central Bank is still likely to undershoot its target for 2000.

Prices of Industrial Outputs and Inflationary Developments in the Czech Republic

Inflation, measured as the rate of growth of consumer prices, constitutes one of the most important macroeconomic measures. It is inseparable from market inefficiencies because it brings about transaction costs, or so-called menu costs, due to the repricing of goods; it conceals price information and generally heightens uncertainty in the economy. This increases real interest rates and reduces investment. Moreover, unexpected changes in price levels lead to the redistribution of wealth in the economy. Debtors usually benefit from heightened inflation, while lenders suffer. In the absence of a well-developed labor market or the full indexation of wages, inflation has a similar influence on real wages, and, thereby, on the living standard of the majority of the population. It is therefore not surprising that most macroeconomists devote a great deal of attention to the accurate prediction of inflation. They also typically monitor producer prices as an important indicator of future consumer price growth. Increases in producer prices are reflected with a lag in prices faced by the end consumer. This article attempts, through statistical and econometric approaches, to explore more fully the relationship between the prices of industrial

Czech economy in 1999: struggling for revival

Sluggish growth of GDP in 1997 was replaced by a decline of roughly 2 % in 1998. The main factor of the recession was a depression of almost all the components of domestic demand, mostly as a consequence of 1997 restrictive policy measures. One of the few positive developments was consolidation of the current account. While the external imbalance had been the most pressing problem in 1996 and 1997, the revival of economic growth represents macroeconomic priority for 1999 and for 2000 probably as well. Slight recovery of domestic demand and GDP cannot be expected before the second half of 1999. At the same time, the deficit of consolidated budgets, which is likely to exceed the Maastricht criterion in 1999, can represent a new threat for macroeconomic stability.

Česká ekonomika v roce 1998: možnosti a rizika

Characteristics for 1997 was a significant slowdown of Gross Domestic Product (GDP) growth: within the first three-quarters, GDP grew by 1.1 %, and our estimate for the whole year is 1.4 %. At the same time 1997 was a turning year with respect to some components of Gross Domestic Product. The growth rate of household consumption decreased substantially (by almost one half). After three years of very dynamic, double-digit growth of gross fixed capital formation, in 1997 investment in fixed capital was falling (a decrease of almost 5%). Government consumption practically stagnated. Growing exports were among the main components of GDP growth, especially in the second half of 1997.