Czech Republic's monetary policy shocks lead to economic downturn and price fluctuations.
The study looked at how Czech monetary policy affects the economy using different methods. They found that when the central bank tightens monetary policy, it leads to lower economic activity and prices after about a year. Prices of tradable goods adjust faster than non-tradable goods. The Czech currency tends to appreciate at first, then gradually depreciates after a tightening of monetary policy. Using real-time output gap data gives more accurate results than current GDP growth data.