E61 - Policy Objectives; Policy Designs and Consistency; Policy CoordinationReturn

The EU Cohesion Policy is one of the European Union’s key policy instruments for reducing economic and social disparities among its regions. The paper evaluates the policy contribution to regional economic growth in V4 (Visegrad Four) countries. The study establishes a significant variation in ESIF (European Structural and Investment Funds) distribution at the NUTS2 (Nomenclature of Territorial Units for Statistics) level within the V4 regions over 2000–2018. It suggests that ESIF absorption was not evenly distributed across regions within the V4 countries. This finding indicates that regional disparities in ESIF distribution may have contributed to economic imbalances within the countries. Secondly, a causal link between regional growth and ESIF absorption is identified. Along with other covariates, the use of the ESIF shows a statistically significant, although very modest, effect on the economic growth of V4 countries. Finally, the assumption of cross-country growth dispersion is investigated. The research results suggest statistically significant regional growth differences between Czechia and Slovakia on the one hand and Poland and Hungary on the other. It implies that the impact of ESIF absorption on economic growth may have varied among these V4 countries, potentially due to differences in policy implementation, economic structures or other factors.

We explore the procyclicality of monetary policy decisions towards the financial cycle in the 1995-2015 period on a sample of seven central banks. Using the real interest rate gap and the credit-to-GDP gap, we provide evidence that monetary policy procyclicality is a material issue occurring in more than 50% of observations in expansionary phase of financial cycle. It indicates that the central bank faces conflicting objectives of price and financial stability (as proxied by cyclical systemic risk). Nevertheless, taking into consideration all financial cycle phases, complementariness between price and financial stability is more frequent than cases with conflicting objectives in the UK, Euro Area and the US. The occurrence of potential procyclical behaviour of monetary policy (especially in the financial cycle expansion phases) underlines the need for proactive macroprudential policy.

The question on the inflation expectations management is one of the most important ones from the central bank's point of view. The inflation forecast can be a helpful tool of managing expectations. If it actually is, the interdependences of the inflation forecast and expectations can be observed. The existence of such interdependences opens the field for determining the preconditions that might support expectations formation. The hypothesis assumes that associations of inflation forecasts and inflation expectations depend on the central bank's credibility and consistency in inflation forecast targeting. The research covers the Czech National Bank, the National Bank of Hungary, the National Bank of Poland and Sveriges Riksbank. The research combines qualitative and quantitative methods. The research uses survey-based expectations quantified with probabilistic method. The main finding is that the relatively high level of credibility and consistency in inflation forecast targeting is not sufficient to achieve strong interdependences of inflation forecast and expectations.

The global banking system proved significantly vulnerable to systemic risk during the 2007-2009 financial crisis. In this paper, we construct an agent-based network model of systemic risk to a banking system, and use it for stress-testing of several different regulatory measures. First, our simulations confirm that sufficient capital buffers in individual banks are crucial for protecting the stability of the whole system. Second, we show that the regulatory measures installed as preventive measures to ensure that the banks possess sufficient capital buffers have almost no positive effects on stability when the system is collapsing. Finally, we highlight various data deficiencies which prevent the researchers and regulators from fully understanding the complete range of systemic risk and make it difficult to devise effective and targeted regulatory measures at this time.

This paper studies whether the dynamic behaviour of real GDP, unemployment and inflation is systematically affected by the timing of elections and by changes of government in the Czech Republic. Two basic models of political cycles are tested - political business cycle models and partisan theories. Political business cycle models emphasize the opportunistic behaviour of incumbents who strive to get re-elected regardless of party affiliation. On the other hand, partisan politicians are faithful to their ideological opinions and therefore attract a specific constituency. The tests partly support the opportunistic motives for the behaviour of Czech politicians. On the contrary, suppositions of partisan motives were not proved.

In this paper we discuss the estimation and methodology of the real equilibrium exchange rate partial equilibrium models and analyse to what extent the resulting estimates are applicable for setting the central parity prior to ERM II entry in the New EU Member States. Given the uncertainty surrounding the estimates, we argue that they are informative in the sign rather than the size of the misalignment of the exchange rate, but may still serve as useful consistency checks for the decision on the setting of the central parity. We argue that policy makers should consider the estimates in their decision-making only if the real exchange rate is substantially misaligned.

Financial sector is prone to cyclical movements and procyclicality of the financial system may endanger financial stability, which depends on asset prices and loan losses due to the fact that the deterioration of bank assets through non-performing loans is characteristics of banking distress. This was the case during Japan's lost decade and the Nordic banking crises. Even the classic banking panics of the Great Depression are being revised in the light of new evidence on the fundamental deterioration of bank assets. Much empirical evidence supports the view that balance sheet variables, such as net worth affect investment and produce business cycle dynamics. In an upswing, the greater availability of credit leads to higher asset prices, which then serve as collateral for more borrowing. Relatively unstable development of share prices on the capital market increases equity risk. This paper is based on the presumption that the stability of macro economic environment, less pronounced cyclical movements and insignificant procyclicality between GDP and equity (used as collaterals for credit insurance) lower equity risk. There was proved no significant procyclicality between collaterals and GDP according to low stock market capitalization. And due to the relation that equity risk (as a part of market risk) is determined by unstable development of shares prices, I accepted the hypothesis of low equity risk in the analysed transition economies on the basis of tested procyclicality.

This paper tries to assess the conditions under which the CNB operates. Using a basic framework suggested by Mishkin (2000), the aim is to find out whether the central bank is able to conduct high-quality monetary policy. First, general principles that central banks should follow to succeed in their pursuit of monetary goals are theoretically introduced. Then, these theoretical principles are looked at in the Czech context. Issues of the strictness and suitability of concrete monetary policy of the CNB will not be dealt with, rather institutional circumstances that potentially allow successful policy are at the centre of this paper. It is concluded that the CNB is functioning in a moderately good environment, but still much room for improvement does exist.

This paper describes the development and the current state of debt management in the Czech Republic. The basic principles on which it was built during the1990s and the importance of the monetary and fiscal policy co-ordination in effective debt management implementation are discussed. The authors try to explain the main factors that are behind the substantial state debt increases in the course of several recent years and to discuss some of the topical issues connected to the debt management targets and procedures. The paper provides a basic description of the instruments used and the conceptual and institutional framework of the Czech Republic debt management system with a particular emphasis on the role of the central bank.

The article analyses the economic development of transition economies (the CR, Hungary, Poland, Slovakia and Slovenia) in the nineties by means of the original graphical method based on a multidimensional view, with the intention to assess convergence or divergence of their economic level vis-a-vis the average level of the EU countries. The polydimensional aspect is based in the first step on four basic objectives of economic policy depicted by the macroeconomic (magic) tetragon. In the second step, an each quadrant of the magic tetragon is extended by six detailed indicators to get a multidimensional convergence polygon. The polygon framework allowed carrying out more detailed analysis of the convergence process. The detailed results of the multidimensional convergence analysis varied across individual countries and over time; the time path of these differences partly reflected the uneven progress in macroeconomic stabilization and recovery of economic growth.

This article addresses the issue of macroeconomic policies in the pre-accession period. The key theme is an assessment of the relationship between the real and nominal convergence of the candidate countries towards the EU. Support for real convergence cannot procced on a long-term basis in contradiction to the nominal convergence criteria. Despite a renewal of growth in 1999, a whole range of persisting structural problems, chiefly in the fiscal area, confirm the benefit of voluntary pursuance of the nominal concergence criteria. Fof the central bank, the inflation criterion is particularly relevant. The issue of catchingup with the EU price level is discussed from this point of view. Neither the theoretical models (the law of one price and the Balassa-Samuelson effect) nor the empirical evidence provide arguments for abandoning the efforts for price stability. The most appropriate monetary policy regime linking the interests of monetary policy and government economic policy is inflation targeting.