Czech exchange rate floor helped fight deflation – IMF paper

The Czech National Bank
The Czech National Bank

The Czech National Bank’s use of an exchange rate floor as an additional tool of monetary policy appears to have been effective in fending off deflation, according to a research paper published by the International Monetary Fund.

In the working paper, Francesca Caselli examines the CNB’s use of a one-sided exchange rate commitment, at CZK27 ($1.2) to €1, noting such a method has some support among literature on responses to the zero lower bound.

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