Theory in practice : the implementation of the foolproof way in Switzerland and the Czech Republic
Master thesis
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http://hdl.handle.net/11250/2483348Issue date
2017Metadata
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- Master of Science [835]
Abstract
We analyse the similarities between the Svensson’s (2000) “The zero bound in an
open economy: A foolproof way of escaping from a liquidity trap” and the
exchange rate target commitment implemented in Switzerland and the Czech
Republic following the European sovereign debt crisis. We observe that the
foolproof way did not work in Switzerland, mainly due to failure to establish the
peg’s credibility. This is linked to the existence of incomplete pass-through, a
feature not contemplated in Svensson’s model. On the other hand, we conclude
that the foolproof way succeed in the Czech Republic, allowing the economy to
escape the liquidity trap.
Description
Masteroppgave(MSc) in Master of Science in Business, Economics - Handelshøyskolen BI, 2017