Publication at Faculty of Social Sciences |
2008
Abstract
This paper focuses on the first ten years of experience with the Czech inflation targeting regime. This regime was introduced at the turn of 1998 after currency turmoil in May 1997.
Its main ambition was to provide a new nominal anchor to the Czech economy and stabilise inflation expectations. Under the inflation targeting, monetary policy has been facing several challenges, which have contributed to periods of substantial inflation target undershooting and economic slack.
These periods were partly related to two episodes of sharp exchange rate appreciation. In spite of the missed targets, though, the regime has been successful at anchoring inflation expectations in the economy, thus achieving one of its main policy goals.