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Empirical Testing of New Keynesian Phillips Curve in Conditions of the Czech Republic in 1994 - 2003

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  • Josef Arlt
  • Miroslav Plašil

Abstract

New concepts have been presented in modelling of inflation dynamics recently, among others the new Keynesian Phillips curve (NKPC). There are several traditional ways of NKPC model validity testing, but none of them seems to be practically applicable in conditions of the Czech Republic. We tried to test the validity of NKPC on the basis of time series. For this purpose we applied an interesting non-traditional method proposed by Demery and Duck. This method does not rely on direct estimation of NKPC parameters, but relatively easy tests based on the cointegration analysis of time series are employed. Its application indicates that the NKPC model cannot be considered as effective in conditions of the Czech Republic; this model does not describe the inflation process sufficiently and it is not a suitable model for inflation prediction or for the choice of appropriate monetary (anti-inflation) policy.

Suggested Citation

  • Josef Arlt & Miroslav Plašil, 2005. "Empirical Testing of New Keynesian Phillips Curve in Conditions of the Czech Republic in 1994 - 2003," Prague Economic Papers, Prague University of Economics and Business, vol. 2005(2), pages 117-129.
    • Handle: RePEc:prg:jnlpep:v:2005:y:2005:i:2:id:257:p:117-129
    DOI: 10.18267/j.pep.257
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    References listed on IDEAS

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    More about this item

    Keywords

    inflation; time series; cointegration analysis; model; new Keynesian Phillips curve;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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