Monetary conditions indicators

The article provides an overview of foreign-language (non-Czech) literature on monetary conditions indices. The authors also discuss the issues involv ed in the construction of a monetary conditions index for the Czech Republi c. They argue that if a monetary conditions index is to have any use for pr actical monetary policy, one must first distinguish two components of monet ary policy stance: the monetary policy stance vis-a-vis the monetary policy target, and the monetary policy target itself. They conclude that MCI can be useful for measuring the monetary stance vis-a-vis the target, but bette r still is a frequent publication of inflation forecasts and the methodolog y behind such forecasts on the part of the central bank.