Fiscal Deficit and Money Issuance in Czech Republic during Covid-19 Pandemic

Bibliographic Data

ID10713360
AuthorsJan Kubíček (0000-0003-0185-422X, Prague University of Economics and Business), Pavel Morda (0009-0002-5039-6827, Prague University of Economics and Business)
Year2023
Volume71
Issue1
Pages68-88
Publication date2023-02-25
Open AccessYes
TypeARTICLE
VenuePolitická ekonomie (JOURNAL)
Journal identifiersISSN: 0032-3233 • E-ISSN: 2336-8225
PublisherPrague University of Economics and Business (PUBLISHER • CZ)
DOI10.18267/j.polek.1375
OpenAlexW4321764795
LanguageEN
References cited12

The public finances of the Czech Republic fell into deep deficits during the pandemic, while the money supply growth rate accelerated. We make a basic comparison of monetary acceleration during the first two years of the pandemic with other countries. We verify that this acceleration in the Czech Republic was partly due to commercial banks increasing credit to the government. We argue that purchases of government bonds by non-residents have a similar effect. This is particularly true when non-residents use existing koruna deposits held by them, partly as a result of past foreign exchange interventions, to purchase government bonds. While there was an acceleration in monetary growth during the pandemic, there was a decline in monetary growth during the Great Financial Crisis (GFC). However, our analysis suggests that this was due mainly to a decline in private credit growth during the GFC. We see no fundamental reasons for a structural change in money demand as a result of the pandemic. We therefore believe that unless the observed monetary acceleration is offset by slower-than-trend monetary growth in the near term, it will translate into an increase in the price level

Broad money · Coronavirus disease 2019 (COVID-19) · Czech · Economic recovery · Economics · Financial crisis · Financial system · Government (linguistics) · Infectious disease (medical specialty) · Interest rate · Macroeconomics · Monetary economics · Monetary policy · Money supply · Pandemic · Fiscal Policies and Political Economy · Fiscal Policy and Economic Growth · Medicine · Monetary Policy and Economic Impact

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