The impacts of monetary policy of the Czech National Bank on selected economic indicators

The aim of the paper is to determine the impact of monetary policy of the Czech National Bank (CNB) on selected economic variables between the years 1996 and 2017. We will therefore examine the long-term relationships between M3 and short-term interest rates in relation to inflation and other economic variables, i.e., gross domestic product (GDP) and bank loans to the private non-financial sector. Time series analysis is performed using Engle-Granger co-integration analysis to find long-term relationships and Granger causality testing to determine mutual short-term relationships between the monitored variables. The empirical results show that there are no long-term relationships between the monitored variables there are only short-term ones. This leads to the conclusion that the development of the inflation rate, GDP, and loan volume can be predicted based on the development of the M3 monetary aggregate and the CNB's basic interest rate to Granger causality. Therefore, we can positively assess the CNB's decision to leave the targeting money supply.