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Empirical Testing of New Keynesian Phillips Curve in Conditions of the Czech Republic in 1994 - 2003

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  • Josef Arlt
  • Miroslav Plašil

Abstract

New concepts have been presented in modelling of inflation dynamics recently, among others the new Keynesian Phillips curve (NKPC). There are several traditional ways of NKPC model validity testing, but none of them seems to be practically applicable in conditions of the Czech Republic. We tried to test the validity of NKPC on the basis of time series. For this purpose we applied an interesting non-traditional method proposed by Demery and Duck. This method does not rely on direct estimation of NKPC parameters, but relatively easy tests based on the cointegration analysis of time series are employed. Its application indicates that the NKPC model cannot be considered as effective in conditions of the Czech Republic; this model does not describe the inflation process sufficiently and it is not a suitable model for inflation prediction or for the choice of appropriate monetary (anti-inflation) policy.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2005 (2005)
Issue (Month): 2 ()
Pages: 117-129

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Handle: RePEc:prg:jnlpep:v:2005:y:2005:i:2:id:257:p:117-129

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Related research

Keywords: time series; new Keynesian Phillips curve; model; inflation; cointegration analysis;

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References

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  1. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
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  8. Laurence Ball & David Romer, 1987. "Real Rigidities and the Non-Neutrality of Money," NBER Working Papers 2476, National Bureau of Economic Research, Inc.
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