Relationship Between Inflation and Economic Activity and Its Variation Over Time in Latvia

Andrejs Bessonovs and Olegs Tkacevs

No 2016/03, Working Papers from Latvijas Banka

Abstract: This paper studies the relationship between inflation and economic slack in Latvia with a particular focus on its time variation. The results suggest that the Phillips curve for Latvia had been steepening before the crisis against the backdrop of rising inflation. In the more recent years, there has been tentative evidence of the Phillips curve flattening as Latvia's economy entered a period of very low inflation. If the current trend of an even weaker response of inflation to economic activity in Latvia persists and proves to be statistically significant, unconventional monetary policy instruments may be of limited effectiveness to control inflation in Latvia. This calls for structural reforms aimed at increasing competition and reducing price stickiness.

Keywords: inflation; Phillips curve; business cycles; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: C32 C51 E31 E52 (search for similar items in EconPapers)
Date: 2016-09-23
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bank.lv/images/stories/pielikumi/publi ... umi/wp_3_2016-en.pdf (application/pdf)
https://www.macroeconomics.lv/sites/default/files/wp_3_2016-en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ltv:wpaper:201603

Access Statistics for this paper

More papers in Working Papers from Latvijas Banka Contact information at EDIRC.
Bibliographic data for series maintained by Konstantins Benkovskis ().