CNB Research News

Does Sentiment Affect Stock Returns? A Meta-analysis Across Survey-based Measures

International Review of Financial Analysis, 2023, Vol. 89, pp. 1–22

Bank Capital, Lending, and Regulation: A Meta-analysis

Journal of Economic Surveys, 2023, Early View

Implementing Yield Curve Control Measures into the CNB Core Forecasting Model

In response to the 2008 financial crisis, when policy rates hit their lower bound, central banks adopted unconventional policies to meet their announced targets. These policies can either directly target interest rates or the quantities of assets. Taking into account the specific features of the Czech economy, this paper presents an extension of the CNB's core projection model for long-term assets and yield curve control measures. This extension demonstrates the ability of the CNB to consider and assess various unconventional policies within its analytical framework.

Foreign Exchange Implications of CBDCs and Their Integration via Bridge Coins

As central banks introduce CBDCs and seek interoperability, a bridge coin emerges, sharing many traits with private digital currencies. Digital wallet adoption spurred by CBDCs enables private cross-border payments in preferred digital currencies. Will fiat currencies and the central banks that issue them be sidetracked by the bridge coin? This question is addressed in a two-country, two-currency model with a global digital currency (digicoin). The results show that under specific FX transaction cost conditions, all three FX markets coexist, and fiat currencies in foreign trade persist unless the bridge coin operator becomes a global banker.

Balancing Volatility and Returns in the Czech National Bank's Foreign Exchange Portfolio

This paper explores potential changes in the Czech National Bank's foreign exchange reserves, constituting 98% of its assets. Using data as of 31 October 2022, we examine three scenarios: (i) increasing equities from 18% to 20%, (ii) raising gold holdings to 100 tons (0.5% to 4.5% of the reserves), and (iii) reducing euro-denominated assets from 46% to 40%. The results show equities at 20% could boost portfolio returns with minimal volatility increase. Gold at 100 tons could increase returns and reduce volatility in Czech koruna terms. However, reducing euro-denominated assets may elevate returns but significantly raise Czech koruna volatility, making this option less suitable.

Annual Assessment of the Forecasts Included in GEO

This article assesses how successful individual institutions were in forecasting inflation last year. Contrary to expectations, 2022 was again turbulent due to Russia's aggression in Ukraine, but economies were surprisingly resilient. The analysis shows that the expected GDP growth did not materialise last year, while inflation in the countries under review was higher than expected.

The Saving Rate in the Euro Area and the Czech Republic – Potential for Growth in Consumption?

This article compares growth in household consumption, the saving rate and investment in selected euro area economies with that in the Czech Republic. The analysis describes that, unlike in the pandemic period, the rise in the saving rate during the energy crisis was due mainly to precautionary motives. The article also expects the higher interest rates to hinder the decline in households' propensity to save in the years ahead.

Business and Financial Cycles of Major Global Economies

This article deals mainly with the practical aspects associated with the modelling of the business and financial cycles. The historically popular shortcut of using H-P-filtered time series as a representation of cycles is debated, with an emphasis on its drawbacks. The use of the countercyclical capital buffer (CCyB) rate as a prime example of a counter-cyclical policy measure is analysed for three major economies — the UK, Germany and France, demonstrating that regulators nowadays tend to disregard the Basel gap in its original form proposed by the Basel Committee when making CCyB rate adjustments.

Communication of Central Bank Forecasts and Their Uncertainties

Economic developments bring unforeseen challenges, leading central banks to communicate uncertainties and risks in macroeconomic predictions. They employ diverse methods to convey potential future scenarios. Some institutions prioritise transparency, quantifying uncertainties using fan charts or alternative scenarios, while others describe risks qualitatively. Additionally, central banks vary in their use and communication of interest rates and exchange rates in forecasting. This article discusses the advantages and disadvantages of the individual communication approaches and describes the practices of the central banks under review.