After the recent financial crisis of 2007, a connection between monetary policy and financial stability has started to be thoroughly investigated. One of the particular areas of this research field deals with the role of various financial variables in the monetary policy rules. The main purpose of this research is to find whether direct incorporation of the financial variables in the monetary policy rule can bring macroeconomic benefits in terms of lower volatility of inflation and output. So far, the main emphasis of the research has been placed on the investigation of the augmented Taylor rules in the context of a closed economy. This thesis sheds light on the performance of the augmented Taylor rules in a small open economy. For this purpose, a New Keynesian DSGE model with two types of financial frictions is constructed. The model is calibrated for the Czech Republic. The thesis provides four conclusions. First, incorporation of the financial variables (asset prices and the volume of credit) in the monetary policy rule is beneficial for macroeconomic stabilization in terms of lower implied volatilities of inflation and output. Second, the usefulness of the augmented monetary policy rule is the most apparent in case of the shock originating abroad. Third, there is a strong link between the financial and the...

In this thesis we examine the effect of foreign exchange interventions in small open economy, focusing on the Czech experience. In the first part we model volatility development before and after the intervention using GARCH model. In the second part we estimate relationship between macroeconomical variables using vector autoregressive model. In this part we estimate impulse response function of exchange rate and inflation. In second part of VAR modeling we provide counterfactual analysis, which compare actual development of variables with alternative scenario in which the interventions would not happen . Our results suggest that the interventions is associated with few months delayed decrease in volatility. Base on scenario analysis the interventions increased inflation by approximately 1.5 % and without the intervention the economy would in deflation around -1 % nowadays. KEYWORDS: Vector autoregression, Volatility modelling, Monetary policy, Intervention Author's e-mail: jantimko16@gmail.com Supervisor's e-mail: tomas.holub@cnb.cz

No description available.

Ph.D. (Economics) / The purpose of this study is to analyse the impact of monetary impulses on the South African economy. In analogy with the exact sciences, which use a laboratory to test hypotheses, this work will rely on a economic laboratory in the form of an econometric model. With the aid of this model, we will attempt to explore the dynamics of the various monetary impulses. In other words, this study will attempt to trace the flow over time of these monetary impulses through various channels toward the real economy. We will try to identify the main channels through which the monetary impulses flow and which convey their impact on the real economy. The system transmitting these impulses to the economy will be called the monetary transmission mechanism. This has always been viewed as a mysterious phenomenon as it is not yet clear how the money stock affects the economy, whether it affects the economic system directly or does so indirectly, via other channels. Nor is it clear whether money should be seen as a unique asset which affects the economic system, or whether it should be treated like any other asset. The importance attached to the money stock by the monetarists, for example, is defended by them on the grounds that the supply of money, which is controlled by the central authorities, affects the economy, because the authorities abuse their monopoly over the money supply. In our research we will evaluate this hypothesis concerning the exogeneity of the money stock. We will show that money should be classified like any other asset, as it is endogenous in nature. This endogeneity of the money stock is determined through the interaction of the money multiplier and the liquidity base, both of which contain endogenous elements.

M.Comm. / The aim of this study is to examine the appropriateness of inflation targeting as the future monetary policy strategy of South Africa. In keeping with international trends, South Africa needs to recognise the changing financial environment in which the Reserve Bank must now operate. The purpose of this study is to show whether South Africa's economic environment and the SARB as the monetary authorities, are indeed ready for implementing inflation targeting in South Africa. Given the limited experience with inflation targeting, the theoretical analysis has formed the foundation that has shaped and influenced the thinking on this strategy monetary policy. The rationale for price stability as the long-term goal of monetary policy is pivotal to all the strategies for controlling inflation: exchange rate pegging; monetary targeting; nominal GDP targeting; the "Just Do It" policy; and lastly, inflation targeting. This study examines the key features and concepts of inflation targeting in order to determine their relevance in a framework for South Africa. Transparency and accountability are central to the inflation-targeting regime and depend largely on the independence of the central bank. It is important to establish the credibility and flexibility of the inflation-targeting framework through frequent communication and by ensuring the accountability of the central bank to the government and the public. Policymakers are faced with many issues and choices when designing the inflation targeting strategy and the potential benefits of the framework will depend on how effectively the strategy is formulated and implemented. It is vital that the design of the strategy attempt to effectively balance both the transparency and the flexibility of the framework. Once we have the theoretical basis we do a detailed analysis of the international experience with inflation targeting. The 1990's saw a number of countries adopting explicit inflation targets as the goal of monetary policy: New Zealand, Canada, the United Kingdom, Sweden, Australia, Finland, Israel, Spain and the Czech Republic. Each country had its own challenges and issues with designing the inflation-targeting framework. We draw on the lessons from the international experience to assess the applicability of inflation targeting for South Africa. After looking at a brief history of South African monetary policy we consider whether the institutional framework in South Africa is appropriate for effectively implementing inflation targeting. We also take a look at the issues of design and implementation that are relevant to the South African situation while considering the central question of whether South Africa is indeed ready for inflation targeting. Finally, we show that the success of an inflation-targeting framework in South Africa will depend on the ability of the Reserve Bank to ensure the transparency of monetary policy and the reliability of the inflation forecasts. At the same time, the credibility of the inflation-targeting regime will depend, not only on a political commitment by the government, but also on the unfailing support of the labour market and the general public. Thus, the biggest challenge facing the Reserve Bank is to prepare itself and the South African market for the new age of direct inflation targeting as an anchor for monetary policy.

M.Comm. / The overall objective of this study was to determine the appropriateness of Inflation Targeting to South Africa, or of South Africa's suitability for Inflation Targeting. For that reason, I shall produce information that will aid in the determination of whether the South African Reserve Bank has been correct in their adoption of this framework, and to propose an alternative, more all-encompassing option. The research design used in this study in terms of Tripodi, Fellin and Meyer's (1982:40) classification can be termed as a hybrid of the exploratory and the quantitative-descriptive designs. Chapter 1 introduces the reader to the research paper. This chapter incorporates the rationale and importance of the study, its methodology, hypothesis, limitations, aims, and referencing method. It sets out clear aims and objectives for the thesis while providing an overview of the material. To facilitate the analysis of Inflation Targeting in South Africa it was vital to have a clear and accurate understanding of what Inflation Targeting is. The definition and an analysis of the definition are covered in Chapter 2. As other authors have detailed this aspect voluminously, it is just dealt with summarily in this section. Chapter 3 discusses the requirements for Inflation Targeting as set out by the authorities. These factors are primarily of a technical nature. While the information garnered for this section is invaluable, it is inadequate in isolation. Countries' individual circumstances play an important role, and need to be considered along with the purely technical requirements for Inflation Targeting. This chapter is important in the analysis as it provides an important yardstick for the analysis of the requirements in South Africa. In order to attain an enhanced grasp of Inflation Targeting and its potential impact and effects on South Africa, it is imperative to take lessons from other countries where the framework has been implemented. Chapter 4 analyses international experiences with Inflation Targeting, with the main aim of learning from the experience of developed and, more importantly, developing nations. The paper then moves into the most important section: that of South Africa. Once a full understanding of what Inflation Targeting involves is obtained, both theoretically and empirically, we are in a position to consider where South Africa fits in. South African monetary policy is evaluated briefly, while the technical requirements of Inflation Targeting are analysed in their South African context. Various problems are discussed with the applicability of the framework to South Africa. The later part of this section analyses technical and socio-political complicating factors, while a description is provided of a suggested alternative framework. The final chapter concludes that South Africa is, indeed, almost certainly "less than suitable" for Inflation Targeting and suggests that a more holistic framework of a "GEAR-type" nature is more likely to be appropriate to a country with the uniqueness of South Africa.

M.Com. (Financial Economics) / This study analyses the existence of a bank lending channel in South Africa and investigates the impact of the securitisation activity on the effectiveness of the bank lending channel during the period 2001–2010 using data from the South African banking sector. Structural Vector Auto Regression (SVAR) and Structural Vector Error Correction Model (SVECM) methods are used to interpret the impulse responses of bank lending to structural shocks (monetary policy) and to securitisation. The conclusion is that the bank lending channel is present and efficient in South Africa during the sample period with a lag and that securitisation acts as a shield against monetary impulses by constituting an additional source of funding for banks.

M.Comm. (Financial Economics) / This dissertation examines the relationship between inflation, inflation uncertainty, and economic growth using quarterly data for South Africa covering the period 1960-2012. Inflation uncertainty is estimated using the Generalized Autoregressive Conditional Heteroscedasticity modelling framework. Granger methods are employed in order to investigate the interaction between inflation, inflation uncertainty, and economic growth. The presence of structural change is investigated through dummy variables representing changes in monetary policy regime. No evidence is found of any significant structural change in either inflation or inflation uncertainty. Granger results indicate that inflation uncertainty has a negative impact on inflation, supporting Holland’s (1995) argument of stabilising central bank behaviour. Conversely, there is evidence that high inflation leads to elevated inflation uncertainty, in accordance with Friedman’s (1977) hypothesis. Inflation uncertainty does not have a significant impact on economic growth in South Africa. However, inflation does have an adverse effect on economic growth, whilst economic growth exerts a positive impact on the rate of inflation. Lastly, economic growth does not have any meaningful effect on inflation uncertainty.

The thesis aims to defend the irreplaceable role of the Austrian business cycle theory in explaining the current financial crisis in the U.S.. Attention is also paid to applied measures of American economic policies and their impact on the elimination of the purification process of the recession. Furthermore, the work deals with the identification of preventive measures, which would reduce the likelihood of the occurrence of economic cycles. Recommendations by representatives of the Austrian School are described as difficult to implement on the basis of number of arguments. In the work are therefore proposed more realistic measures to limit the volatility of the economic cycle, which emanate mainly from the composite price index, which is the subject of this text. The index reflects the price development in all stages of production and should therefore in monetary policy matters replace the current use of price indicators, based on the inflated scale of consumption, taking into account only minimal effects of monetary expansion. The work deals with the calculation of the composite price index for the United States, which used the instrument of Skounsen indicator of gross domestic output. The development of the composite price index in the US is then analyzed and compared with the development of other macroeconomic variables. Based on this examination, we recommend the use of composite price index for monetary policy regime of inflation targeting and the implementation thereof by the Federal Reserve monetary policy.

The diploma thesis deals with impacts of Czech national bank's (ČNB) monetary policy on the real economy during the transformation process in nineties of 20th century. The transformation process started by approval Program of national reform ("Scénář ekonomické reformy"). The main objective of the transformation process was to ensure macroeconomics stability with the emphasis on price stability. The consequences of the monetary policy result from the chronological comparison of the economy and the monetary policy development, which I divided into various periods of the 90s of 20th century. The restrictive character of monetary policy provided macroeconomic stability in the first half of the nineties. In the second half of nineties the real economy was negative influenced by inadequate interventions of NB (growth of minimum reserve requirements and growth of basic interest rate). The result of this was the slowdown of economy and its consequent decline. The economy was slightly stimulated by the end of nineties, which was caused by new mode of monetary policy of the NB and new mode of exchange rate. In the conclusion of the diploma thesis I give a brief description of the transformation process on the Hungarian, Polish and Slovak economies.