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The relationship between dynamic price and dynamic unemployment: the case of the Central European-3 and the Baltic Tigers

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  • Luis F. Dumlao

Abstract

Convention specifies the relationship between price and unemployment in terms of the Phillips curve (PC) where inflation and the rate of unemployment are correlated. This paper uses a variant of the PC that is more consistent with the relationship between price and output as depicted in the aggregate supply (AS) curve. The relationship between price and unemployment using convention and its variant is tested on Poland, the Czech Republic, Hungary, Estonia, Latvia, Lithuania and the pooled data. The Expectations Augmented (EA) is able to track a negative relation between inflation and unemployment better than the New Keynesian (NK) is able. Within the EA runs, the convention is able to track the same negative relation better than the variant, but one has to be cautious given the implied results.

Suggested Citation

  • Luis F. Dumlao, 2014. "The relationship between dynamic price and dynamic unemployment: the case of the Central European-3 and the Baltic Tigers," International Journal of Economic Sciences, Prague University of Economics and Business, vol. 2014(2), pages 20-42.
    • Handle: RePEc:prg:jnljes:v:2014:y:2014:i:2:id:11:p:20-42
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    References listed on IDEAS

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    5. Laurence Ball, 2000. "Near-rationality and inflation in two monetary regimes," Proceedings, Federal Reserve Bank of San Francisco.
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    8. Fuhrer, Jeffrey C, 1997. "The (Un)Importance of Forward-Looking Behavior in Price Specifications," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 338-350, August.
    9. Rudd, Jeremy & Whelan, Karl, 2005. "New tests of the new-Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1167-1181, September.
    10. Luis Dumlao, 2014. "The relationship between dynamic price and dynamic unemployment: the case of the CE-3 and the Baltic Tigers," Proceedings of International Academic Conferences 0100114, International Institute of Social and Economic Sciences.
    11. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-984, November.
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    Cited by:

    1. Dominik Stroukal, 2016. "A longitudinal analysis of the effect of unemployment on health," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 5(2), pages 55-68, June.

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    More about this item

    Keywords

    NA; employment; unemployment; inflation; incomes policy; price policy; Phillips curve; Central Europe; Baltic Tigers;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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