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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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Cited by:
  1. Selen Baser & Hande Kucuk & Fethi Ogunc, 2013. "Inflation Dynamics in Turkey : In Pursuit of a Domestic Cost Measure," CBT Research Notes in Economics 1311, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  2. Borek Vasicek, 2010. "Is Monetary Policy in New Members States Asymmetric?," William Davidson Institute Working Papers Series wp1005, William Davidson Institute at the University of Michigan.
  3. Malikane, Christopher, 2013. "A New Keynesian Triangle Phillips Curve," MPRA Paper 43548, University Library of Munich, Germany.
  4. Katarína Danišková & Jarko Fidrmuc, 2011. "Inflation Convergence and the New Keynesian Phillips Curve in the Czech Republic," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(2), pages 099-115, August.
  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).
  6. 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.

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