Detail publikace

Interest Rates and Prices Causality in the Czech Republic - Granger Approach

POMĚNKOVÁ, J. KAPOUNEK, S.

Originální název

Interest Rates and Prices Causality in the Czech Republic - Granger Approach

Typ

článek v časopise ve Web of Science, Jimp

Jazyk

angličtina

Originální abstrakt

Monetary policy analysis concerns itself with both the assumptions of the transmission mechanism and the direction of causality between the nominal (i.e. the money) and real economy. The traditional channel of monetary policy implementation works via interest rate changes and their impact on the investment activity and the aggregate demand. Altering the relationship between the aggregate demand and supply then impacts the general price level and hence inflation. Alternatively, Post Keynesians postulate money as a residual, In their approach, banks extend credit in response to movements in investment activities and demand for money. In this paper authors use the VAR (i.e. the vector autoregressive) approach applied to the Taylor rule concept to identify the mechanism and impact of the monetary policy in the small open post transformation economy of the Czech Republic. The causality (in Granger sense) between the interest rate and prices in the Czech Republic is then identified. The two alternative modelling approaches are tested. First is the standard VAR analysis with lagged values of interest rate, inflation and economic growth as explanatory variables. This model shows the one way causality (in a Granger sense) between inflation rate and interest rate (i.e. the inflation rate is (Granger) caused by lagged interest rate). In second, the lead (instead of lagged) values of interest rate, inflation rate and real exchange rate are used. This estimate shows one way causality between inflation rate and interest rate in the sense that interest rate is caused by the lead (i.e. the expected future) inflation rate. The assumptions based on the money as a residual of the economic process were rejected in both models.

Klíčová slova

exogenous and endogenous money, transmission mechanism, Taylor rule

Autoři

POMĚNKOVÁ, J.; KAPOUNEK, S.

Vydáno

21. 4. 2009

Nakladatel

VŠE Praha

Místo

Praha

ISSN

0139-570X

Periodikum

Agricultural Economics (AGRICECON)

Ročník

55

Číslo

7

Stát

Česká republika

Strany od

347

Strany do

356

Strany počet

10

URL

https://agricecon.agriculturejournals.cz/artkey/age-200907-0006_interest-rates-and-prices-causality-in-the-czech-republic-granger-approach.php

BibTex

@article{BUT114192,
  author="Jitka {Dluhá} and Svatopluk {Kapounek}",
  title="Interest Rates and Prices Causality in the Czech Republic - Granger Approach",
  journal="Agricultural Economics (AGRICECON)",
  year="2009",
  volume="55",
  number="7",
  pages="347--356",
  doi="10.17221/2/2009-AGRICECON",
  issn="0139-570X",
  url="https://agricecon.agriculturejournals.cz/artkey/age-200907-0006_interest-rates-and-prices-causality-in-the-czech-republic-granger-approach.php"
}