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Time Varying NAIRU Estimates in Central Europe

Balázs Varga ()
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Balázs Varga: OTP Fund Management and Corvinus University of Budapest

No 1306, Working Papers from Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest

Abstract: This paper estimates Phillips curve relationships for the data of four Central European countries, the Czech Republic, Hungary, Poland and Slovakia, using a sample period from the mid-1990s till 2012. For the estimation Gordon’s triangle model is used with the Kalman filter, where the time-varying NAIRU is described as a latent variable following a random walk, and its deviation from the actual unemployment rate affects inflation, among other factors. The inclusion of inflation expectations is found to be statistically significant, albeit it significantly reduces the size and significance of the unemployment gap coefficient. The results show that so far only the Czech Republic and Hungary exhibit a significant inflation-unemployment trade-off, while the results for Poland and Slovakia do not support such a relationship.

Keywords: unemployment; Phillips curve; time varying NAIRU; Kalman filter (search for similar items in EconPapers)
JEL-codes: C32 E24 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2013-06-20
New Economics Papers: this item is included in nep-eec and nep-tra
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