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The paper assesses inflation risks resulting from the convergence of structures of relative prices in Central and Eastern European (CEE) countries toward the European Union (EU). The basic idea of the paper is that under low downward flexibility of domestic nominal prices, the adjustment of relative price structures is likely to lead to higher inflation. The authors find that the degree of differences in the structures of relative prices in transition economies vis-à-vis EU economies has a strong negative relationship to price levels in the transition economies. Based on their calculations, the authors assess the likely future inflationary pressures that can stem from the remaining differences between the structures of relative prices in the CEE economies and the EU. The authors argue that their approach can be thought of as an extension of the standard Balassa-Samuelson explanation of international variability in price levels.

Investments: Commodities --- Inflation --- Macroeconomics --- Price Level --- Deflation --- Monetary Policy --- Central Banks and Their Policies --- Economic Integration --- Socialist Systems and Transitional Economies: Prices --- Commodity Markets --- Macroeconomics: Consumption --- Saving --- Wealth --- Investment & securities --- Price adjustments --- Price structures --- Commodities --- Consumption --- Prices --- National accounts --- Commercial products --- Economics --- Czech Republic

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Zonder onderwerpscode: financiewezen

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This paper develops a new central bank transparency index for inflation-targeting central banks (CBT-IT index). It applies the CBT-IT index to the Czech National Bank (CNB), one of the most transparent inflation-targeting central banks. The CNB has invested heavily in developing a Forecasting and Policy Analysis System (FPAS) to implement a full-fledged inflation-forecast-targeting (IFT) regime. The components of CBT-IT index include measures of transparency about monetary policy objectives, the FPAS designed to support IFT, and the monetary policymaking process. For the CNB, all three components have shown substantial improvements over time but a few gaps remain. The CNB is currently working on eliminating some of these gaps.

Monetary policy. --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Macroeconomics --- Economics: General --- International Economics --- Inflation --- Banks and Banking --- Money and Monetary Policy --- Finance: General --- Foreign Exchange --- Informal Economy --- Underground Econom --- Price Level --- Deflation --- Monetary Policy --- Central Banks and Their Policies --- Interest Rates: Determination, Term Structure, and Effects --- General Financial Markets: Government Policy and Regulation --- Economic & financial crises & disasters --- Economics of specific sectors --- Banking --- Monetary economics --- Finance --- Financial crises --- Economic sectors --- Prices --- Inflation targeting --- Monetary policy --- Central bank transparency --- Central banks --- Central bank policy rate --- Financial services --- Financial sector stability --- Financial sector policy and analysis --- Currency crises --- Informal sector --- Economics --- Interest rates --- Financial services industry --- Czech Republic