. VAR models are estimated for the Czech Republic, Hungary and Poland. Contemporaneous and sign restrictions are imposed in … of risk premium shock renders it almost impossible for the interest rate policy to smooth the exchange rate with the aim …

effect. (2) Consumer prices appear more responsive to an interest rate shock during the first half of our sample, when Poland …-2012) in the Polish economy. The empirical findings show that: (1) output appears more responsive to an interest rate shock at … the beginning of our sample. Since 2000, absorbing this shock has become less costly in terms of output, notwithstanding …

variables. Shock decompositions of the output and the inflation rate revealed the driving forces of the business cycles; demand …), whereas prices were also driven by supply and monetary policy shocks, the latter being more important for Poland …

authorities managed to reduce its contagion to Poland. We also show that under foreign bank ownership such policy is strongly …