Thesis (Selection of subject)Thesis (Selection of subject)(version: 336)
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The Role of Business Confidence in the Monetary Policy Transmission Mechanism: Evidence from the Euro Area
Thesis title in Czech: Role sentimentu podniků v transmisi měnové politiky: zjištění pro eurozónu
Thesis title in English: The Role of Business Confidence in the Monetary Policy Transmission Mechanism: Evidence from the Euro Area
Key words: Business confidence, monetary transmission, SVAR model, TVP-VAR model
English key words: Business confidence, monetary transmission, SVAR model, TVP-VAR model
Academic year of topic announcement: 2019/2020
Type of assignment: diploma thesis
Thesis language: angličtina
Department: Institute of Economic Studies (23-IES)
Supervisor: doc. Mgr. Tomáš Holub, Ph.D.
Author: hidden - assigned by the advisor
Date of registration: 22.07.2020
Date of assignment: 22.07.2020
Date and time of defence: 16.06.2021 09:00
Venue of defence: Výuka probíhá online, JONLINE, Pomocná místnost pro rozvrhování výuky probíhají online
Date of electronic submission:29.04.2021
Date of proceeded defence: 16.06.2021
Reviewers: prof. Ing. et Ing. Luboš Komárek, M.Sc., MBA, Ph.D.
 
 
 
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Preliminary scope of work
Traditional macroeconomics believes that confidence is not the main cause of economic fluctuations, but when faced with financial crises, monetary authorities still emphasize the role of stabilizing confidence. Although people generally agree that confidence is an important part of the transmission of macro-policies to micro-individuals, there is neither empirical evidence support nor corresponding mechanism research. This thesis attempts to answer the following questions: Does business confidence affect the effectiveness of monetary policy? Does business confidence have the same impact on monetary policy in different economic periods?
This thesis first constructed a structural vector auto-regression (SVAR) model to test the role of business confidence in the transmission of monetary policy in the euro area. The empirical results show that expansionary monetary policy can effectively boost business confidence while stimulating output growth. In addition, this thesis also conducted a robustness test, using share price and exchange rate as proxy variables of the monetary transmission mechanism, and concluded that business confidence plays a strong role in the transmission of interest rates and asset prices, and in the transmission of exchange, the role is weaker. Subsequently, in order to verify the influence of business confidence with different lead times and different time points on monetary policy, this thesis established a time-varying parameter vector autoregression (TVP-VAR) model. The role of confidence in the transmission of monetary policy is mainly manifested as a short-term impact, which gradually weakens in the long-term Moreover, at different stages of economic development, the business confidence index has different effects on the transmission of monetary policy. In times of economic crisis, the role of confidence will be more sensitive.
Preliminary scope of work in English
Traditional macroeconomics believes that confidence is not the main cause of economic fluctuations, but when faced with financial crises, monetary authorities still emphasize the role of stabilizing confidence. Although people generally agree that confidence is an important part of the transmission of macro-policies to micro-individuals, there is neither empirical evidence support nor corresponding mechanism research. This thesis attempts to answer the following questions: Does business confidence affect the effectiveness of monetary policy? Does business confidence have the same impact on monetary policy in different economic periods?
This thesis first constructed a structural vector auto-regression (SVAR) model to test the role of business confidence in the transmission of monetary policy in the euro area. The empirical results show that expansionary monetary policy can effectively boost business confidence while stimulating output growth. In addition, this thesis also conducted a robustness test, using share price and exchange rate as proxy variables of the monetary transmission mechanism, and concluded that business confidence plays a strong role in the transmission of interest rates and asset prices, and in the transmission of exchange, the role is weaker. Subsequently, in order to verify the influence of business confidence with different lead times and different time points on monetary policy, this thesis established a time-varying parameter vector autoregression (TVP-VAR) model. The role of confidence in the transmission of monetary policy is mainly manifested as a short-term impact, which gradually weakens in the long-term Moreover, at different stages of economic development, the business confidence index has different effects on the transmission of monetary policy. In times of economic crisis, the role of confidence will be more sensitive.
 
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