Robert Holman, Ing., Bank Board, Czech National Bank, Na Prikope 28, Prague, 193 00, Czech Republic
Paper title: The Czech Experience with Safeguarding Financial Stability
Authors: Robert Holman
Czech National Bank Board Member
Address: Na Příkopě 28, Prague 1, 11503, Czech Republic
Email: robert.holman@cnb.cz
Paper abstract:
This paper is aimed to analyze the relationship between financial stability and monetary policy in global environment, which have been undergoing recently some important structural changes and financial markets integration. While in other sectors competition is a driving force for efficiency, in the financial sector keen competition may cause taking in too much risks. At the same time high degree of openness makes the economy sensitive to financial turbulences.
This paper tries to identify main financial stability indicators and monetary environment in the sample country – Czech Republic and to find out to which extent monetary policy instruments are applicable and efficient to maintain stability of financial system in a small and open economy. The problem of financial stability maintenance will be described and analyzed in the context of monetary policy goals and financial market regulations.
The question to be answered is whether the monetary policy of inflation targeting is designed to maintain also financial stability, or whether the two goals are to be treated separate with financial stability goal to be achieved by microeconomic regulatory instruments rather than by monetary policy instruments. We will also offer some preliminary remarks on the impact of current global financial crisis on financial stability in Czech Republic.