Some Insights into Monetary and Fiscal Policy Interactions in the Czech Republic

Abstract

The global financial and debt crisis highlights the need for a better understanding of how fiscal and monetary policies interact. This article examines three aspects of these interactions, as seen from the perspective of the Czech National Bank. It first looks at the effects of fiscal policy on the interest rate channel in the Czech Republic, where long-term government bond yields are an important determinant of market interest rates. Second, it reviews alternative methods for the cyclical adjustment of the fiscal balance, which might provide different assessments of the fiscal policy stance. Finally, it describes how fiscal policy is included in the Czech National Bank forecast.

Full publication: Fiscal policy, public debt and monetary policy in emerging market economies.

Keywords: Monetary policy, fiscal policy, interactions, transmission, Czech Republic

JEL Classification: E52, E58, E62, E63