Czech Republic

The Czech Republic underwent a period of rapid financial innovation and liberalisation, with unsuccessful exchange rate pegging and monetary targets replaced by inflation targets from 1998.

Years Targets and attainment Classification
1993-95 currency pegged to basket with narrow margins set by central bank (but private forex market with some autonomy); monetary targets overshot 2 years out of 3; monetary policy operations initially focused on bank reserves, from 1995 on short-term interest rates augmented exchange rate fix AERF
1996-97 exchange rate band widened February 1996, peg abandoned May 1997; monetary targets undershot 1996, met 1997; monetary instruments now mainly indirect; rapid financial market development loosely structured discretion LSD
1998-2005 declining inflation targets met or near-met except for undershoot 2003 (inflation expectations also fall briefly below target band); main monetary instrument is repo rate; changes to inflation targeting procedures loose converging inflation targeting LCIT
2006-14 inflation targets (lower from 2010) met, except overshoot 2007-8 and undershoot 2009, when inflation expectations returned quickly to the target zone; initial aim of entering ERM2 and then adopting euro set aside; occasional forex intervention full inflation targeting FIT

Selected IMF references: RED 1993 pp36-7; RED 1994, pp25-6, 33-7, 46-7; SBS pp52-6; SI 1998 chIV; SR 2001 pp22-5; SR 2004 p7; SR 2005 p12; SR 2010 p34; SR 2011 p14; SR 2014 p21.

Additional sources: Beblavy (2007a); Beblavy (2007b).

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