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Estimating Natural Rate of Interest and Equilibrium Exchange Rate: A Case of the Czech Republic

Author

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  • Pikhart Zdeněk

    (University of Economics in Prague, Faculty of Finance and Accounting, W. Churchill Sq.1938/4, 130 67Prague 3 and also Ministry of Finance of the Czech Republic, Department of Economic policy, Macroeconomic Analysis Unit, Letenská 15, 118 10Prague 1, Czech Republic)

  • Froňková Pavla

    (Ministry of Finance of the Czech Republic, Department of Economic policy, Macroeconomic Analysis Unit, Letenská 15, 118 10Prague 1, Czech Republic)

Abstract

Article deals with estimating real natural interest rate and exchange rate to construct monetary conditions index suitable for the Czech open economy. Despite unobservable characteristics of underlying interest rates and exchange rate, the importance of reference indicators for monetary policy is crucial. Proposed monetary condition index in gap form examines monetary impulse on economic and credit cycle in inflation targeting model.

Suggested Citation

  • Pikhart Zdeněk & Froňková Pavla, 2019. "Estimating Natural Rate of Interest and Equilibrium Exchange Rate: A Case of the Czech Republic," Review of Economic Perspectives, Sciendo, vol. 19(4), pages 231-248, December.
    • Handle: RePEc:vrs:reoecp:v:19:y:2019:i:4:p:231-248:n:1
    DOI: 10.2478/revecp-2019-0013
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    References listed on IDEAS

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    More about this item

    Keywords

    Natural Rate of Interest; Equilibrium Exchange Rate; Monetary Conditions Index;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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