Monetary Policy Before And After The Financial Crisis: Risks, Economic And Legislative Impacts

Abstract

The article analyses monetary policy response to the world financial crisis and focuses more closely on the monetary policy of the Czech National Bank (CNB) at this time. Until 2007, the implementation of monetary policy in OECD countries was perceived very positively. Howeve r, the financial crisis has clearly shown that the world's financial markets are highly interconnected, and this can have a major impact on individual national economies. Therefore, the monetary policy strategy has changed from a policy based on the so cal led flexible inflation targeting. Ensuring price stability is emphasised as part of the monetary policy role of the CNB in the provisions of Article 98 of the Constitution, in the Czech Republic. CNB is perceived as one of the most independent central bank s, the contituional dimension of its independence being confirmed by case law of the Czech Constitutional Court. In response to the financial crisis, CNB was forced to pursue unconventional monetary policy in the form of foreign exchange interventions betw een 2013 and 2017. However, during the time period of these interventions, CNB policy did not lead to achievement of the inflation target. Following the completion of foreign exchange interventions, CNB returned to conventional monetary policy through inte rest rates.