Is real depreciation expansionary? The case of the Czech Republic

• Main Author: Yu HSING
• Format: Article
• Language: English
• Published: General Association of Economists from Romania 2016-09-01
• Series: Theoretical and Applied Economics
• Subjects: Exchange rates; Government deficits; Stock prices; Real wages
• Online Access: http://store.ectap.ro/articole/1200.pdf

Applying the aggregate demand and aggregate supply model and based on a quarterly sample during 2003.Q1 – 2015.Q4, this paper finds that Czech’s aggregate output is positively associated with real appreciation of the koruna, the real stock price, lagged German real GDP and real wages and negatively influenced by the government deficit as a percent of GDP, the real lending rate and the expected inflation rate. Recent real depreciation of the koruna would not help Czech’s aggregate output, and recent relatively low government deficit as a percent of GDP would raise aggregate output.