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

Bořek Vašíček ()

No wp971, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

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.

Keywords: Inflation dynamics; New Keynesian Phillips curve; CEE countries; GMM estimation (search for similar items in EconPapers)
JEL-codes: C32 E31 (search for similar items in EconPapers)
Pages: pages
Date: 2009-10-01
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: View citations in EconPapers (4)

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Related works:
Journal Article: Inflation Dynamics and the New Keynesian Phillips Curve in Four Central European Countries (2011)
Working Paper: Inflation dynamics and the New Keynesian Phillips curve in EU-4 (2009)
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