The exchange interventions as a tool of the central bank against deflation in the Czech Republic

Abstract

Banking sector has always been the area of great interest, but since the outbreak of the global financial crisis in 2007, the focus on this area has been multiplied. As the economies of euro area, as the global economy, robust recovery still have not been seen. The purpose of this article is to examine the effectiveness of how Czech national bank fights against imminent deflation. Among basic monetary policy tools include short-term interest rates, but since these interest rates are on the technical zero from 2012, the Czech national bank could not use this tool to effectively combat the impending deflation. For this reason were used in this struggle the FX interventions. With the use of correlation analysis, we tested the influence of these FX interventions on the macroeconomic indicators, such as inflation and GDP.