Monetary transmission and the financial sector in the Czech Republic

0380423 - NHU-C 2013 RIV US eng J - Článek v odborném periodiku
Havránek, T. - Horváth, R. - Matějů, Jakub
Monetary transmission and the financial sector in the Czech Republic.
Economic Change and Restructuring. Roč. 45, č. 3 (2012), s. 135-155. ISSN 1573-9414. E-ISSN 1574-0277
Grant CEP: GA MŠMT(CZ) SVV 265801/2012
Institucionální podpora: PRVOUK-P23
Klíčová slova: transmission mechanism * monetary policy * Czech Republic
Kód oboru RIV: AH - Ekonomie

In this paper, we examine the interactions of financial variables and the macroeconomy within the block-restriction vector autoregression model and evaluate to what extent the financial variables improve the forecasts of GDP growth and inflation. For this reason, various financial variables are examined, including those unexplored in previous literature, such as the share of liquid assets in the banking industry and the loan loss provision rate. Our results suggest that financial variables have a systematic and statistically significant effect on macroeconomic fluctuations. In terms of forecast evaluation, financial variables in general seem to improve the forecast of macroeconomic variables, but the predictive performance of individual financial variables varies over time, even though it strengthens during the 2008-2009 crisis. The results give some support for the risk-taking channel of monetary policy, as the level of the monetary policy rate is positively associated with the loan loss provision rate of commercial banks. Finally, a more stable financial system is found to contribute to faster economic growth.
Trvalý link: http://hdl.handle.net/11104/0211138