SYMMETRIC BEHAVIOUR TO FULFIL THE MAIN OBJECTIVE AS THE BASIS FOR THE CREDIBILITY OF CENTRAL BANKS BEHAVIOUR ON THE EXAMPLE OF CNB

Abstract

The aim of the paper is to verify whether the CNB behaved symmetrically in the period of 1998-2016 while fulfilling its basic mandate - price stability - and whether the decision to use the exchange rate commitment influenced the assessment of its symmetrical approach. The paper provides a comprehensive view of the CNB's symmetry, which is considered as the basis for the credibility of central bank behaviour in achieving the main objective – price stability. Based on analyses of deviations of inflation from the target in both directions and assess the implemented exceptions, it was shown that the CNB was stricter than was necessary from the point of view of resulting inflation over the period under review. In most of the years, it was below the inflation target which can be judged as an asymmetric approach in monetary policy decisions. The decision to apply the exchange rate commitment has had an impact on the CNB's symmetric approach. From the point of view of mere symmetry, the introduction of the exchange rate commitment was a positive step. 

Data:
Received: 27 Mar 2020
Revised: 19 May 2020
Accepted: 6 Jun 2020
Published: 20 Jun 2020