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

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