FOREIGN EXCHANGE INTERVENTIONS UNDER INFLATION TARGETING: THE CZECH EXPERIENCE

This article discusses the role of foreign exchange interventions in the inflation-targeting regime, focusing on the Czech experience since 1998. We find some evidence that the interventions had a statistically significant, but short lived and economically not very important, impact on the koruna's exchange rate and its volatility. We also discuss consistency of the interventions with the inflation-targeting framework. All the Czech intervention episodes are judged to be consistent with the inflation targets and output developments, but for two episodes not fully consistent regarding the mix of monetary conditions. (JEL E42, E44, E52, E58, E65, F31 )