Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate

The thesis focuses on the estimation of the effective lower bound for the Czech National Bank's policy rate. It is the first attempt of this kind in the Czech context and also one of few in the international scale. The effective lower bound is determined by the value below which holding and usi...

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Main Author: Kolcunová, Dominika
Other Authors: Havránek, Tomáš
Format: Dissertation
Language:English
Published: 2017
Online Access:http://www.nusl.cz/ntk/nusl-367634
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spelling ndltd-nusl.cz-oai-invenio.nusl.cz-3676342017-10-31T04:39:28Z Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate Kolcunová, Dominika Havránek, Tomáš Dědek, Oldřich The thesis focuses on the estimation of the effective lower bound for the Czech National Bank's policy rate. It is the first attempt of this kind in the Czech context and also one of few in the international scale. The effective lower bound is determined by the value below which holding and using cash would be more favourable than depositing money in a bank account with a negative rate. This bound may be approximated based on costs of storage, insurance and transportation of cash and also based on the loss of convenience associated with cashless payments. We estimate that costs of the former lie in the interval from 0.2% to 0.6%. The latter, costs of loss of convenience, are relatively high in the Czech market as they attain around 1%. The estimate based on interest charges which present a direct cost and decrease in the bank profitability asserts slightly lower values, in particular with respect to a high share of deposits and repo operations at the CNB. Altogether we get a value below -1%, in the interval (-1.5%, -1.0%), under shorter term duration possibly lower, in the interval (-2.0%, -1.0%). The second part of the thesis offers modelling of transmission of interest rates. The results state that under the assumption of the average transmission over the past years it would be necessary to decrease... 2017 info:eu-repo/semantics/masterThesis http://www.nusl.cz/ntk/nusl-367634 eng info:eu-repo/semantics/restrictedAccess
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language English
format Dissertation
sources NDLTD
description The thesis focuses on the estimation of the effective lower bound for the Czech National Bank's policy rate. It is the first attempt of this kind in the Czech context and also one of few in the international scale. The effective lower bound is determined by the value below which holding and using cash would be more favourable than depositing money in a bank account with a negative rate. This bound may be approximated based on costs of storage, insurance and transportation of cash and also based on the loss of convenience associated with cashless payments. We estimate that costs of the former lie in the interval from 0.2% to 0.6%. The latter, costs of loss of convenience, are relatively high in the Czech market as they attain around 1%. The estimate based on interest charges which present a direct cost and decrease in the bank profitability asserts slightly lower values, in particular with respect to a high share of deposits and repo operations at the CNB. Altogether we get a value below -1%, in the interval (-1.5%, -1.0%), under shorter term duration possibly lower, in the interval (-2.0%, -1.0%). The second part of the thesis offers modelling of transmission of interest rates. The results state that under the assumption of the average transmission over the past years it would be necessary to decrease...
author2 Havránek, Tomáš
author_facet Havránek, Tomáš
Kolcunová, Dominika
author Kolcunová, Dominika
spellingShingle Kolcunová, Dominika
Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate
author_sort Kolcunová, Dominika
title Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate
title_short Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate
title_full Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate
title_fullStr Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate
title_full_unstemmed Estimating the Effective Lower Bound for the Czech National Bank's Policy Rate
title_sort estimating the effective lower bound for the czech national bank's policy rate
publishDate 2017
url http://www.nusl.cz/ntk/nusl-367634
work_keys_str_mv AT kolcunovadominika estimatingtheeffectivelowerboundfortheczechnationalbankspolicyrate
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