Asymmetric Preferences for Monetary Policy Rules in the Visegrad Four and the Financial Crisis

This paper analyses asymmetric preferences for the monetary policies of the Visegrad Four (the Czech Republic, Hungary, Poland, and Slovakia). We extend Surico's (2007) asymmetric preference model to a small open economy in order to consider the exchange rate for a monetary policy framework as suggested by several earlier studies on the Visegrad Four. The results suggest that two asymmetries are evident in all the countries: an aversion to interest rates above the reference value and a preference for nominal exchange rate depreciation relative to the euro area. Moreover, the Czech policy does not exhibit any change in preferences during the recent financial crisis, while Poland responds aggressively.