Changes in Monetary Policy Responses in the Czech Republic, Hungary and Poland 1

In this paper, we analyze how the monetary policy responses of the Czech National Bank, the Hungarian National Bank, and the National Bank of Poland have changed over the period from 1996 QI to 2022 Q3 using the Kalman filter. Our findings are as follows. Firstly, we identify concealed discretion am...

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Bibliographic Details
Published inEkonomický časopis Vol. 71; no. 6/7; pp. 369 - 404
Main Authors Pokorný, Tomáš, Chytilová, Helena
Format Journal Article
LanguageEnglish
Published Bratislava Slovak Academy of Sciences, Institute of Economic Research 01.07.2023
Subjects
Central banks
Equilibrium
Inflation
Interest rates
Kalman filters
Monetary policy
National banks
Transition economies
Czech Republic
Hungary
Poland
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Summary:In this paper, we analyze how the monetary policy responses of the Czech National Bank, the Hungarian National Bank, and the National Bank of Poland have changed over the period from 1996 QI to 2022 Q3 using the Kalman filter. Our findings are as follows. Firstly, we identify concealed discretion among the monetary policy authorities, which is traced through significant changes in their monetary policy parameters, highlighting the importance of applying a time-varying estimation framework. Secondly, we observe a decreasing response of policy rates to the inflation gap over the observed period. The reduced response in interest rates aligns with the anchored inflation expectations in the Czech Republic and Poland. Thirdly, the interest rate smoothing parameter has declined over the observed period, reflecting the central banks increased willingness to adjust policy rates more vigorously. Additionally, we find a significant decrease in the long-term equilibrium interest rates, indicated by the policy-neutral rate, across the analyzed countries.
ISSN:0013-3035
DOI:10.31577/ekoncas.2023.06-07.01