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Time Varying NAIRU Estimates in Central Europe

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  • Balázs Varga

    ()
    (OTP Fund Management and Corvinus University of Budapest)

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    Abstract

    This paper estimates Phillips curve relationships for the data of four Central European countries, the Czech Republic, Hungary, Poland and Slovakia, using a sample period from the mid-1990s till 2012. For the estimation Gordon’s triangle model is used with the Kalman filter, where the time-varying NAIRU is described as a latent variable following a random walk, and its deviation from the actual unemployment rate affects inflation, among other factors. The inclusion of inflation expectations is found to be statistically significant, albeit it significantly reduces the size and significance of the unemployment gap coefficient. The results show that so far only the Czech Republic and Hungary exhibit a significant inflation-unemployment trade-off, while the results for Poland and Slovakia do not support such a relationship.

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    File URL: http://web.uni-corvinus.hu/matkg/working_papers/wp_2013_6_varga.pdf
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    Bibliographic Info

    Paper provided by Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest in its series Working Papers with number 1306.

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    Length: 14 pages
    Date of creation: 20 Jun 2013
    Date of revision:
    Handle: RePEc:mkg:wpaper:1306

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    Related research

    Keywords: unemployment; Phillips curve; time varying NAIRU; Kalman filter;

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    1. Gregor Smith, 2006. "Japan's Phillips Curve Looks Like Japan," Working Papers 1083, Queen's University, Department of Economics.
    2. Laurence Boone & Claude Giorno & Mara Meacci & Dave Rae & Pete Richardson & Dave Turner, 2001. "Estimating the structural rate of unemployment for the OECD countries," OECD Economic Studies, OECD Publishing, vol. 2001(2), pages 171-216.
    3. Camarero, Mariam & Carrion-i-Silvestre, Josep Lluis & Tamarit, Cecilio, 2005. "Unemployment dynamics and NAIRU estimates for accession countries: A univariate approach," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 584-603, September.
    4. Jeremy Rudd & Karl Whelan, 2001. "New tests of the New-Keynesian Phillips curve," Finance and Economics Discussion Series 2001-30, Board of Governors of the Federal Reserve System (U.S.).
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