Modeling Inflation in Poland: A Structural Cointegration Approach

Byung-Yeon Kim

Eastern European Economics, 2008, vol. 46, issue 6, 60-69

Abstract: This paper uses cointegration and error-correction models to analyze the relative effects of the monetary, labor, and external sectors on Polish inflation from 1990 to 1999. We use a structural system approach in which cointegration relations are used to derive deviations from steady-state levels. The results suggest that the labor and external sectors dominated the determination of Polish inflation during the above period, but their effects on inflation changed in the mid-1990s. During the period 1995-99, the appreciation of the domestic currency contributed to reducing inflation, whereas excessive wage increases prevented inflation from decreasing to a lower level.

Date: 2008
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