Publication at Faculty of Mathematics and Physics, Faculty of Social Sciences |
2008
Abstract
This paper focuses on the Czech Republic's first ten years of experience with its inflation-targeting regime. Under this regime, the Czech Republic has successfully achieved disinflation.
However, there were two periods of substantial inflation target undershooting and economic slack, related to two episodes of sharp exchange rate appreciation. Dealing with exchange rate volatility has been a key challenge for inflation targeting in the Czech Republic.
Despite the missed targets, though, the regime has been successful at anchoring the inflation expectations of analysts and firms close to the announced targets, suggesting that it has worked well as a nominal anchor for the economy.