Consumers, Consumer Prices and the Czech Business Cycle Identification
In this paper we propose an alternative method for deriving the business cycle. We interpret the varying inflationary responses to a constant demand shock in a partial equilibrium model. An above-average inflationary response indicates a boom phase and a below-average response shows an economic slowdown. Our model uses data for prices and household budget shares which are not subject to revisions and are consistent with the inflation measure. Hence, it mitigates the common drawbacks of usually applied techniques, such as real-time data mismeasurement or end-point bias of univariate filters. It follows that the results are altered neither by GDP data revisions, labor share determination and NAIRU estimation and total productivity smoothing, nor by the end-point bias of data filtering. The proposed method is thus preferred to other complementary methods such as GDP series filtering or the production function approach in showing truly the inflation environment. It is applied to the Czech quarterly data during 1994- 2003 and compared to other available business cycle estimates for the Czech economy. Comparing our business cycle estimation method with the production function method, used by the Economic Intelligence Unit and the Czech Ministry of Finance, and the Kalman filter, used by the Czech National Bank, we found the highest correlation between our measure and the Economic Intelligence Unit's indicator.
|Date of creation:||May 2004|
|Contact details of provider:|| Postal: Na Prikope 28, 115 03 Prague 1|
Phone: 00420 2 2442 1111
Fax: 00420 2 2421 8522
Web page: http://www.cnb.cz/en/research/research_intro/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Athanasios Orphanides & Simon van Norden, 1999.
"The Reliability of Output Gap Estimates in Real Time,"
- Athanasios Orphanides & Simon van Norden, 2002. "The Unreliability of Output-Gap Estimates in Real Time," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 569-583, November.
- Athanasios Orphanides & Simon van Norden, 1999. "The reliability of output gap estimates in real time," Finance and Economics Discussion Series 1999-38, Board of Governors of the Federal Reserve System (U.S.).
- Athanasios Orphanides & Simon Van_Norden, 2000. "The Reliability of Output Gap Estimates in Real Time," Econometric Society World Congress 2000 Contributed Papers 0768, Econometric Society.
- Athanasios Orphanides & Simon van Norden, 2001. "The Unreliability of Output Gap Estimates in Real Time," CIRANO Working Papers 2001s-57, CIRANO.
- Ehrmann, Michael & Smets, Frank, 2003.
"Uncertain potential output: implications for monetary policy,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 27(9), pages 1611-1638, July.
- Ehrmann, M. & Smets, F., 2001. "Uncertain Potential Output: Implications for Monetary Policy," Papers 59, Quebec a Montreal - Recherche en gestion.
- Michael Ehrmann and Frank Smets, 2001. "Uncertain Potential Output: Implications for Monetary Policy," Computing in Economics and Finance 2001 8, Society for Computational Economics.
- Ehrmann, Michael & Smets, Frank, 2001. "Uncertain potential output: implications for monetary policy," Working Paper Series 0059, European Central Bank.
- Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, vol. 44(5), pages 979-99, September.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
- Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999.
"Monetary policy shocks: What have we learned and to what end?,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148
- Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
- Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
- Paolo Guarda, 2002. "Potential output and the output gap in Luxembourg: some alternative methods," BCL working papers 4, Central Bank of Luxembourg.
- Giordani, Paolo, 2004.
"An alternative explanation of the price puzzle,"
Journal of Monetary Economics,
Elsevier, vol. 51(6), pages 1271-1296, September.
- Giordani, Paolo, 2000. "An alternative explanation of the price puzzle," SSE/EFI Working Paper Series in Economics and Finance 414, Stockholm School of Economics, revised 06 Dec 2000.
- Giordani, Paolo, 2001. "An Alternative Explanation of the Price Puzzle," Working Paper Series 125, Sveriges Riksbank (Central Bank of Sweden).
- Willman, Alpo, 2002. "Euro area production function and potential output: a supply side system approach," Working Paper Series 0153, European Central Bank.
- Argia M. Sbordone, 2002.
"An optimizing model of U.S. wage and price dynamics,"
Federal Reserve Bank of San Francisco, issue Mar.
- Argia M. Sbordone, 2001. "An Optimizing Model of U.S. Wage and Price Dynamics," Departmental Working Papers 200110, Rutgers University, Department of Economics.
- Ryo Kato, 2003. "Matlab code for Sbordone's estimation for a sticky price model," QM&RBC Codes 116, Quantitative Macroeconomics & Real Business Cycles.
- Jeffrey C. Fuhrer, 1995.
"The [un]importance of forward-looking behavior in price specifications,"
95-6, Federal Reserve Bank of Boston.
- 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 338-50, August.
- Paula De Masi, 1997. "IMF Estimates of Potential Output; Theory and Practice," IMF Working Papers 97/177, International Monetary Fund.
- John Muellbauer, 1975. "Aggregation, Income Distribution and Consumer Demand," Review of Economic Studies, Oxford University Press, vol. 42(4), pages 525-543.
- James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
- Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
- Roberts, John M., 1997. "Is inflation sticky?," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 173-196, July.
When requesting a correction, please mention this item's handle: RePEc:cnb:wpaper:2004/04. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jan Babecky)
If references are entirely missing, you can add them using this form.