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Inflation dynamics and the New Keynesian Phillips curve in EU-4

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  • Borek Vasicek

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Abstract

The paper seeks to shed light on inflation dynamics of four new EU member states (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. We find the following. (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. (3) Although inflation holds forward-looking component, the backward-looking one is substantial. An intuitive explanation for higher inflation persistence may be rather adaptive than rational price setting of local firms.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp971.

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Length: pages
Date of creation: 01 Oct 2009
Date of revision:
Handle: RePEc:wdi:papers:2009-971

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Keywords: Inflation dynamics; New Keynesian Phillips curve; CEE countries; GMM estimation;

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Citations

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Cited by:
  1. Vašíček, Bořek, 2012. "Is monetary policy in the new EU member states asymmetric?," Economic Systems, Elsevier, vol. 36(2), pages 235-263.
  2. 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).
  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," Working Papers 292, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  5. 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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