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Hungarian Inflation Dynamics

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  • Júlia Lendvai

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    (University of Namur, Economics Department.)

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    Abstract

    This paper estimates traditional and New Phillips curves for Hungary over the sample period 1995Q1 to 2004Q1. It presents the first structural Phillips curve estimations for a New EU Member State economy. We find that Hungarian inflation dynamics can be reasonably well described by a standard New Hybrid Phillips curve and by its open economy extension specifying imported goods as intermediate production goods. Our estimation results indicate that Hungarian inflation is significantly more inertial than Euro area inflation. Hungarian inflation inertia appears to be the result of pervasive backward looking price setting behaviour, while prices seem to be reset more frequently than in the Euro area. At the same time, Hungarian inflation dynamics is comparable to that of countries characterized by a relatively high average inflation rate.

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    File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_muhelytanulmanyok/OP_46.pdf
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    Bibliographic Info

    Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Occasional Papers with number 2005/46.

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    Length: 52 pages
    Date of creation: 2005
    Date of revision:
    Handle: RePEc:mnb:opaper:2005/46

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    Web page: http://www.mnb.hu/
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    Related research

    Keywords: New Keynesian Phillips curve; Inflation dynamics; Open economy.;

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    Cited by:
    1. Szilárd Benk & Zoltán M. Jakab & Gábor Vadas, 2005. "Potential Output Estimations for Hungary: A Survey of Different Approaches," MNB Occasional Papers 2005/43, Magyar Nemzeti Bank (the central bank of Hungary).
    2. Borek Vasicek, 2009. "Inflation dynamics and the New Keynesian Phillips curve in EU-4," William Davidson Institute Working Papers Series wp971, William Davidson Institute at the University of Michigan.
    3. Michal Franta & Branislav Saxa & Katerina Smidkova, 2007. "Inflation Persistence in New EU Member States: Is It Different Than in the Euro Area Members?," Working Papers 2007/10, Czech National Bank, Research Department.
    4. Aleksejs Melihovs & Anna Zasova, 2007. "Estimation of the Phillips Curve for Latvia," Working Papers 2007/03, Latvijas Banka.

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