Estimate of the Czech National Bank’s Preferences in NOEM DSGE model

This article deals with estimation of preferences of the Czech National Bank. New Keynesian small open economy model developed by Gali and Monacelli with optimal commitment monetary policy is considered in order to estimate them. The article uses the solution for optimal commitment policy proposed by R. Dennis. Estimates of the model parameters are obtained by Bayesian estimation technique with use of the Metropolis-Hastings algorithm and the Kalman filter. The diagnostics proposed by Brooks and Gelman and Geweke are carried out to examine the konvergence of the Markov chain. We found out that the Czech National Bank pays a little attention to output stabilization in comparison to its concern over inflation targeting. The results indicates that the Czech National Bank's most important objective is inflation targeting. This result is in accordance with proclaimed monetary policy of the Czech National Bank.