Flattening of the New Keynesian Phillips curve: Evidence for an emerging, small open economy

Karol Szafranek

Economic Modelling, 2017, vol. 63, issue C, 334-348

Abstract: The flattening of the Phillips curve is a vigorously investigated phenomenon in many advanced economies. Still little evidence has been presented for emerging, small open economies facing persistently low inflation. In this paper I address this issue through rigorous estimation of a substantial number of stylized, open-economy hybrid new Keynesian Phillips curves for Poland. I find robust evidence of the flattening of the Phillips curve and the rising impact of external factors for both headline and core inflation. I conclude that during excessive disinflation in Poland the flattening of the Phillips curve can be partly explained by the underutilization of labour, whereas the stronger impact of global factors on core inflation suggests strengthening indirect effects. The changes in the estimated parameters indicate that the macroeconomic cost of bringing inflation back to the desired target has increased. Further identification of the reasons behind the flattening of the Phillips curve in an emerging, small open economy should provide useful insights for monetary policy.

Keywords: Hybrid Nkpc; Inflation; Flattening; External factors; Emerging; Small open economy (search for similar items in EconPapers)
JEL-codes: C13 C22 C26 E31 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Related works:
Working Paper: Linking excessive disinflation and output movements in an emerging, small open economy A hybrid New Keynesian Phillips Curve perspective (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:63:y:2017:i:c:p:334-348

DOI: 10.1016/j.econmod.2017.01.009

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