Question

2. Provide Laffer curve and fiscal policy in the Czech Republic in 2018

3. Describe the function of  Commercial Bank in the Czech Repulic and discount rate from Czech national bank in 2018

Answer 1

Answer (2)

Fiscal policy refers to the government policies and actions with respect to change in the government spending and taxation in order to boost the economic growth and bring stability in the economy. During 2018, the economy of Czech Republic witnessed good economic growth that helped the government in maintaining a positive public surplus that stood at 1.5% of GDP, where the surplus was recorded on account of local and central government and social security funds also.

During the second quarter of year 2018, the public investment increased by approximately 20%.

Due to positive economic growth, the local government witnessed a surplus of CZK 23 billion, whereas state government recorded a surplus of CZK 6 billion and public health companies recorded a surplus of CZK 10 billion. Higher economic growth also resulted in an increase in the tax revenue majorly from personal income taxes and property taxes.

Due to a greater economic growth in year 2018, Czech Republic shows a greater budget surplus that is equal to 1.5% of the GDP that is due to the higher tax revenue of Czech Republic in year 2018. State budget surplus of Czech Republic is equal to CZK 6 billion. Local government's budget surplus is equal to CZK 23 billion which means that there will be a higher tax revenue in the Czech Republic.

Answer (3)  

Commercial bank is the second largest bank of Czech Republic. Mainly it lends to big corporate houses against real estates as collateral. 50% of commercial bank loans are given against real estate securities.

Discount rate of Czech Republic in year 2018 is equal to 0.75%.

The Commercial bank or Komercni banka is the second largest bank of the Czech Republic in terms of the assets.

The commercial bank served majorly corporate clients or big corporate houses, where the share of the loans to corporate clients stood at % of the total loans advanced by the Commercial bank.

The CB provided loan to corporate houses against real estate due to which they suffered huge losses on account of decline in real estate prices due to which the loan portfolio of CB got deteriorated.

The other small and medium sized commercial banks in the Czech Republic are engaged in providing loans to the individuals and corporate houses.

They accept deposits from retail clients and individual depositors that are used for advancing loans for investment purposes.

They are also engaged in providing funds for foreign trade and providing the facility of traveller's check.

Discount rate is the rate at which the central bank lends funds to the commercial banks in order to help them meet short term reserve requirements. In 2018, the discount rate as stated by the Czech National bank was 0.75% p.a.