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The Impact of the Regime-Shift Premium on Forward Interest Rates and Inflation Expectations in the Czech Republic (in Czech)

Author

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  • Tomáš Holinka
  • Vladimír Stiller

Abstract

The article analyzes the factors leading to the fall of forward interest rates in the Czech Republic between 1999 and 2003. A key point in this regard is the existence of a term and a regime-shift premium associated with the country’s anticipated entry into the eurozone. The paper suggests that the shift into a credible low inflation regime, accompanied by a decreased regime-shift premium, may have affected Czech forward rates. Inflation expectations are subject to regime shifts and cyclical economic development, and to expectations of lower central-bank inflation targets.

Suggested Citation

  • Tomáš Holinka & Vladimír Stiller, 2004. "The Impact of the Regime-Shift Premium on Forward Interest Rates and Inflation Expectations in the Czech Republic (in Czech)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 54(5-6), pages 190-201, May.
    • Handle: RePEc:fau:fauart:v:54:y:2004:i:5-6:p:190-201
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    File URL: http://journal.fsv.cuni.cz/storage/971_s_190_201.pdf
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    More about this item

    Keywords

    regime shift; term premium; credibility; inflation expectation; FRA;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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