Unconventional Monetary Policy of the Czech National Bank

Abstract

In the face of the global financial crisis, many central banks applied non-standard monetary policy instruments. They were activated after lowering short-term interest rates to a level close to zero and after the use of classical tools was exhausted. In the conditions of negative GDP growth, low inflation and zero interest rates, the Czech National Bank decided to use the exchange rate as a non-standard instrument of monetary policy. The activities carried out stimulated economic growth and had a relatively small impact on the level of inflation. The Czech experience allows determining the conditions in which it is possible to apply the exchange rate as an instrument of monetary policy and the expected effects of its introduction.