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Inflation Dynamics and the New Keynesian Phillips Curve in Four Central European Countries

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  • Borek Vašícek

Abstract

This paper seeks to shed light on the inflation dynamics of four new central European EU members: the Czech Republic, Hungary, Poland, and Slovakia. To this end, the New Keynesian Phillips curve augmented for open economies is estimated and additional statistical tests applied, with the following results: (1) the claim of New Keynesians that the real marginal cost is the main inflation-forcing variable is fragile, (2) inflation seems to be driven by external factors, and (3) although inflation holds a forward-looking component, the backward-looking component is substantial. An intuitive explanation for higher inflation persistence may be adaptive, rather than rational price setting of local firms.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 47 (2011)
Issue (Month): 5 (September)
Pages: 71-100

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Handle: RePEc:mes:emfitr:v:47:y:2011:i:5:p:71-100

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

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Keywords: Central European countries; GMM estimation; inflation dynamics; New Keynesian Phillips curve;

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Citations

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Cited by:
  1. Malikane, Christopher, 2013. "A New Keynesian Triangle Phillips Curve," MPRA Paper 43548, University Library of Munich, Germany.
  2. Borek Vasicek, 2011. "Is Monetary Policy in the New EU Member States Asymmetric?," Working Papers 2011/05, Czech National Bank, Research Department.
  3. Jaromir Baxa & Miroslav Plasil & Borek Vasicek, 2012. "Changes in Inflation Dynamics under Inflation Targeting? Evidence from Central European Countries," Working Papers 2012/04, Czech National Bank, Research Department.
  4. Katarína Danišková & Jarko Fidrmuc, 2011. "Inflation Convergence and the New Keynesian, Phillips Curve in the Czech Republic," Working Papers 292, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  5. Katarína Danišková & Jarko Fidrmuc, 2012. "Meta-Analysis of the New Keynesian Phillips Curve," Working Papers 314, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).

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