The Czech Republic underwent a period of rapid financial innovation and liberalisation, with unsuccessful exchange rate pegging and monetary targets replaced by inflation targeting 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 |
| 2006-23 | inflation targets (lower and without band from 2010) met up to 2020, except overshoot 2007-8 and undershoot 2009, when inflation expectations returned quickly to the target zone, also undershoots 2013-16 when medium-term expectations remained anchored; initial aim of entering ERM2 prior to adopting euro set aside; periodic forex intervention; macroprudential policies introduced; exchange rate floor November 2013 to April 2017, as additional instrument in IT (instead of QE) to avoid deflation, with significant forex intervention in last few months; strong response to Covid-19, overall effects less severe than elsewhere, but recovery disrupted by war in Ukraine and related hike in inflation in 2022-23; inflation target overshot from mid-2021 to end-2023, household expectations 12 months ahead rise sharply but financial market expectations 3 years ahead remain anchored | 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 pp5-6, 21; SR 2016 pp6, 10-12, 38-42; SI 2017 pp2-4; SR 2017 pp13-15; SR 2021 pp4-7, 13-14; SR 2022 pp4-6, 9, 12-13; SR 2023 pp7-8, 16, 18-20.
Additional sources: Beblavy (2007a); Beblavy (2007b); Czech National Bank expected inflation data at https://www.cnb.cz/en/statistics/arad-time-series-system/ (accessed 13.8.24).
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Monetary Policy Frameworks 