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Estimation of the New Keynesian Phillips Curve in the Czech Environment

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  • Milan Bouda

Abstract

The paper deals with the estimation of the New Keynesian Phillips curve (NKPC). First, the history of the Phillips curve and the NKPC is outlined. Next, similar research and papers regarding the NKPC are mentioned. The main goal of the paper is to estimate the parameters of the NKPC using the Bayesian techniques. These techniques are widely used for the DSGE model estimation and this paper contains links to the source foreign literature. The NKPC is estimated as part of a fully calibrated Small Open Economy (SOE) DSGE model. The SOE DSGE model consists of households, firms, the government and the central bank. The estimation is performed on the Czech data and the period is from 2001Q1 to 2012Q2. The first output of the paper is the parameter estimates of the NKPC. The main finding is that the future expected inflation plays a crucial role in setting the level of inflation. Moreover, a shock decomposition of domestic and imported inflation is performed and the main output is that the domestic monetary policy shock causes crucial changes in the level of both domestic and imported inflation.

Suggested Citation

  • Milan Bouda, 2013. "Estimation of the New Keynesian Phillips Curve in the Czech Environment," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2013(5), pages 31-46.
    • Handle: RePEc:prg:jnlaop:v:2013:y:2013:i:5:id:414:p:31-46
    DOI: 10.18267/j.aop.414
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    References listed on IDEAS

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    More about this item

    Keywords

    New Keynesian Phillips curve; Dynare; Bayesian estimation; Shock decomposition; Small Open Economy;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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