Research Interests:
Research Interests:
Research Interests: Business, Economics, Modeling, Foreign Exchange Market, Policy Analysis, and 15 moreMonetary Policy, Emerging Market, Emerging market economies, Credit Risk, Central Banking and Macro-financial linkages, Financial Sector, Financial intermediation, Central Bank, Economic Model, Financial frictions, Credit Crunch, Dollarization, monetary policy transmission, Small Open Economy, and Credit Growth
Since the introduction of the inflation targeting regime in 1998 the Czech National Bank has made considerable progress in developing formal tools for supporting its Forecasting and Policy Analysis System. This paper documents the... more
Since the introduction of the inflation targeting regime in 1998 the Czech National Bank has made considerable progress in developing formal tools for supporting its Forecasting and Policy Analysis System. This paper documents the advances in the ongoing research aimed at developing a DSGE small open economy model designed to capture some of the most important features of the Czech economy - both the business-cycle regularities and the recent developments associated with the economy's transition and its convergence towards the industrialized European countries. The model in its current form is able to capture trends in relative prices, allow for medium-convergence in expenditure shares, and deal with the undercapitalization and investment inflow issues. Besides the model exhibits real and nominal rigidities that are in line with the recent New Open Economy Macroeconomics literature built fully on first principles. The innovative features of our model include the international cu...
Research Interests:
The efficiency of macroeconomic policies depends on adequate business cycle approximation. The CNB’s approach is aimed at estimating the deviation of real GDP from its “inflation-non-accelerating” level. Such deviation – the output gap –... more
The efficiency of macroeconomic policies depends on adequate business cycle approximation. The CNB’s approach is aimed at estimating the deviation of real GDP from its “inflation-non-accelerating” level. Such deviation – the output gap – reflects demanddriven inflationary pressures, where the Phillips curve is of primary importance. By contrast, the production function method reflects the supply-side or “capacity” view of the economy’s potential. The two approaches are subject to methodological disputes and deliver different quantitative results, thus leaving decision makers still with a considerable degree of uncertainty. That is why alternative approaches are being developed. The following articles illustrate this problem in more detail.
We propose the method of eigenvalue filtering as a new tool to extract time series subcomponents (such as business-cycle or irregular) defined by properties of the underlying eigenvalues. We logically extend the Beveridge-Nelson... more
We propose the method of eigenvalue filtering as a new tool to extract time series subcomponents (such as business-cycle or irregular) defined by properties of the underlying eigenvalues. We logically extend the Beveridge-Nelson decomposition of the VAR time-series models focusing on the transient component. We introduce the canonical state-space representation of the VAR models to facilitate this type of analysis. We illustrate the eigenvalue filtering by examining a stylized model of inflation determination estimated on the Czech data.We characterize the estimated components of CPI, WPI and import inflations, together with the real production wage and real output, survey their basic properties, and impose an identification scheme to calculate the structural innovations. We test the results in a simple bootstrap simulation experiment. We find two major areas for further research: first, verifying and improving the robustness of the method, and second, exploring the method’s potenti...
Research Interests:
Central bank policymakers often cast judgement about macroeconomic forecasts in reduced form terms, basing this on off-model information that is not easily mapped to a structural DSGE framework. We show how to compute forecasts... more
Central bank policymakers often cast judgement about macroeconomic forecasts in reduced form terms, basing this on off-model information that is not easily mapped to a structural DSGE framework. We show how to compute forecasts conditioned on policymaker judgement ...
Research Interests:
Viewed from the outside, inflation targeting involves the central bank regularly producing an inflation forecast, comparing the forecast outcome to the target, and adjusting interest rates accordingly. However, there is more to the... more
Viewed from the outside, inflation targeting involves the central bank regularly producing an inflation forecast, comparing the forecast outcome to the target, and adjusting interest rates accordingly. However, there is more to the inflation-targeting process than meets the eye. Sub-optimal policy interest rates can be costly for the economy, and hence central bankers pay attention not only to the formal forecasting process itself but also to various strategic issues and uncertainties related to the forecast. This issue of the CNB Research Bulletin begins with an outline of the forecasting model currently used by the CNB, including efforts aimed at its extension (Jaromír Beneš, Tibor Hlédik and David Vávra). Kateřina Šmídková goes on to present various methods of dealing with forecast uncertainty. Michal Skořepa then discusses the ways central banks' future interest rates can be incorporated in their projections of future economic developments. And finally, Viktor Kotlán evaluat...
Estimates of potential output and the neutral short-term interest rate play important roles in policy making. However, such estimates are associated with significant uncertainty and subject to significant revisions. This paper extends the... more
Estimates of potential output and the neutral short-term interest rate play important roles in policy making. However, such estimates are associated with significant uncertainty and subject to significant revisions. This paper extends the structural multivariate filter methodology by adding a monetary policy block, which allows estimating the neutral rate of interest for the U.S. economy. The addition of the monetary policy block further improves the reliability of the structural multivariate filter.
Research Interests:
Research Interests:
Research Interests:
Research Interests:
Research Interests:
We build an extension of a small open economy DSGE model to incorpo- rate in policy simulations and forecasts a feedback loop between a banking sector, bank capital, and default risk on the one hand, and real activity on the other hand in... more
We build an extension of a small open economy DSGE model to incorpo- rate in policy simulations and forecasts a feedback loop between a banking sector, bank capital, and default risk on the one hand, and real activity on the other hand in economies exposed to currency and maturity mismatches. The framework can be used to address the following four broad categories of issues: (I) the effect of the state of the banking sector (especially its capi- talisation) on the predictions of macroeconomic indicators, (II) assessing the risks of large balance sheet effects vis-` a-vis large financial shocks and deval- uations or depreciations, (III) using time-vayring capital requirements as a complementary policy instrument, and (IV) providing basic macroeconomic and dynamic consistency in systemic risk simulations and early warning ex- ercises.
Research Interests:
Research Interests:
Research Interests:
© 2004 International Monetary Fund WP/04/45 IMF Working Paper Asia and Pacific Department A Multivariate Filter for Measuring Potential Output and the NAIRU: Application to the Czech Republic Prepared by Jaromir Benes and Papa... more
© 2004 International Monetary Fund WP/04/45 IMF Working Paper Asia and Pacific Department A Multivariate Filter for Measuring Potential Output and the NAIRU: Application to the Czech Republic Prepared by Jaromir Benes and Papa N'Diaye1 Authorized for distribution by ...
Research Interests: Econometrics, Production, Time Series, Prediction, Forecasting, and 15 moreFiscal policy, Time series analysis, Czech Republic, Monetary Policy, Random Walk, Correlation, Equation, Structural Change, Phillips curve, Economic Models, Random Variables, Economic Model, Hodrick Prescott, Covariance, and potential output
We investigate the implications of the existence of multi-period fixed-rate loans for the behaviour of a small open economy exposed to finance shocks and housing boom-and-bust cycles. To this end, we propose a simple and analytically... more
We investigate the implications of the existence of multi-period fixed-rate loans for the behaviour of a small open economy exposed to finance shocks and housing boom-and-bust cycles. To this end, we propose a simple and analytically tractable method of incorporating ...
Research Interests:
We discuss and reconcile two diametrically opposed views concerning the future of world oil production and prices. The geological view expects that physical constraints will dominate the future evolution of oil output and prices. It is... more
We discuss and reconcile two diametrically opposed views concerning the future of world oil production and prices. The geological view expects that physical constraints will dominate the future evolution of oil output and prices. It is supported by the fact that world oil production has plateaued since 2005 despite historically high prices, and that spare capacity has been near historic lows. The technological view of oil expects that higher oil prices must eventually have a decisive effect on oil output, by encouraging technological ...
We discuss and reconcile two diametrically opposed views concerning the future of world oil production and prices. The geological view expects that physical constraints will dominate the future evolution of oil output and prices. It is... more
We discuss and reconcile two diametrically opposed views concerning the future of world oil production and prices. The geological view expects that physical constraints will dominate the future evolution of oil output and prices. It is supported by the fact that world oil production has plateaued since 2005 despite historically high prices, and that spare capacity has been near historic lows. The technological view of oil expects that higher oil prices must eventually have a decisive effect on oil output, by encouraging technological ...
Facilities of adaptive Bayesian identification as well as utilizing a suitably-rebuilt linearized model as a model controlled by an optimal control system will be demonstrated in this paper. Estimation of time-variant parameters was... more
Facilities of adaptive Bayesian identification as well as utilizing a suitably-rebuilt linearized model as a model controlled by an optimal control system will be demonstrated in this paper. Estimation of time-variant parameters was performed by mean of extended Kalman-Bucy filter with ...
Facilities of adaptive Bayesian identification as well as utilizing a suitably-rebuilt linearized model as a model controlled by an optimal control system will be demonstrated in this paper. Estimation of time-variant parameters was... more
Facilities of adaptive Bayesian identification as well as utilizing a suitably-rebuilt linearized model as a model controlled by an optimal control system will be demonstrated in this paper. Estimation of time-variant parameters was performed by mean of extended Kalman-Bucy filter with ...