To provide a rigorous analysis of monetary policy in the face of financial instability, we extend the standard dynamic stochastic general equilibrium model to include a financial system. Our simulations suggest that if financial instability affects output and inflation with a lag, and if the...

The paper analyzes the stabilization objectives of optimal monetary policy and the trade-offs facing the central bank in a two-sector small open economy model obtained as a limiting case of a two-country DSGE framework. We introduce a more complicated economic structure, namely, multiple...

This paper focuses on the forecasting process at the Czech National Bank with an emphasis on incorporating expert judgments into forecasts and addressing data uncertainty. At the beginning, the core model and the forecasting process are described and it is presented how data and the underlying...