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Inflation Dynamics in the New EU Member States: How Relevant Are External Factors?

Alexander Mihailov (), Fabio Rumler () and Johann Scharler

No em-dp2010-04, Economics & Management Discussion Papers from Henley Business School, Reading University

Abstract: In this paper we evaluate the relative influence of external versus domestic inflation drivers in the 12 new European Union (EU) member countries. Our empirical analysis is based on the New Keynesian Phillips Curve (NKPC) derived in Gali and Monacelli (2005) for small open economies (SOE). Employing the Generalized Method of Moments (GMM), we find that the SOE NKPC is well supported in the new EU member states. We also find that the inflation process is dominated by domestic variables in the larger countries of our sample, whereas external variables are mostly relevant in the smaller countries.

Keywords: New Keynesian Phillips Curve; small open economies; inflation dynamics; new EU member countries; GMM estimation (search for similar items in EconPapers)
JEL-codes: C32 C52 E31 F41 P22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mon, nep-opm and nep-tra
Date: 2010-05-09
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Related works:
Journal Article: Inflation Dynamics in the New EU Member States: How Relevant Are External Factors? (2011)
Working Paper: Inflation Dynamics in the New EU Member States: How Relevant Are External Factors? (2009) Downloads
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