You are looking at 1 - 2 of 2 items

  • Author or Editor: Jiří Rusnok x
Clear All Modify Search
You do not have access to this content

Jiří Rusnok

Gradual rise in inflation in 2014–2016 and further acceleration of inflation pressures in late 2016 and early 2017 created the conditions for fulfilling the Czech National Bank’s inflation target on a sustainable basis. At the beginning of 2017, the continuation of exchange rate commitment was no longer necessary. The exit from the commitment in April 2017 was the first step towards normalizing monetary policy, that is, towards using interest rates as the main instrument again. The second half of 2017 witnessed two repo rate increases, namely at the start of August and November. Overall, financial conditions are gradually becoming more restrictive, not only through increasing interest rates and appreciating koruna but also through macro-prudential tightening. The policies are thus quite consistent and not only act countercyclically, but also safeguard financial stability.

You do not have access to this content

Jiří Rusnok

The Czech economy has passed a series of monetary milestones on the transformation road over the past 30 years. This article describes the most important of these: the adoption of a fixed exchange rate, the separation of the Czechoslovak koruna, the subsequent exit from the peg, the adoption of inflation targeting, the creation of a special privatization account, two appreciation bubbles and the introduction of an exchange rate floor. Moreover, this article identifies the lessons to be drawn from each milestone. While the independent koruna has at times been a useful shock absorber, it has itself been a source of shocks on several other occasions. The Czech experience with a fixed exchange rate suggests that the sustainability of this arrangement critically depends on the consistency of the overall monetary policy framework. Also, expectations can have a decisive effect on how events unfold. If the framework becomes inconsistent, timing the exit right is crucial for mitigating the adverse effects on the economy. The overall lesson is that having your own currency is great as long as you treat it well.