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New Keynesian Phillips Curve in Lithuania

Author

Listed:
  • Ernestas Virbickas

    (Bank of Lithuania)

Abstract

The paper provides estimates for the New Keynesian Phillips curve (NKPC) in Lithuania. The paper considers the baseline and hybrid NKPC, the latter accounting for inflation inertia, under the closed and open economy frameworks. The estimates highlight the importance of expected and lagged inflation in the inflation formation process. The role of real marginal cost is found to be limited in shaping the dynamics of inflation. The study yields estimates for the underlying characteristics of pricing behaviour in Lithuania. The estimates show that the price duration stands at around 2.2–2.8 quarters, while the fraction of firms that adjust prices in a backward looking way amounts to around one third.

Suggested Citation

  • Ernestas Virbickas, 2012. "New Keynesian Phillips Curve in Lithuania," Bank of Lithuania Working Paper Series 14, Bank of Lithuania.
    • Handle: RePEc:lie:wpaper:14
    as

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    File URL: https://www.lb.lt/en/publications/no-14-new-keynesian-phillips-curve-in-lithuania
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    References listed on IDEAS

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    8. Ernestas Virbickas, 2010. "Wage and Price Setting Behaviour of Lithuanian Firms," Bank of Lithuania Working Paper Series 7, Bank of Lithuania.
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    Cited by:

    1. Vladimir Mihajlović & Gordana Marjanović, 2020. "Asymmetries in effects of domestic inflation drivers in the Baltic States: a Phillips curve-based nonlinear ARDL approach," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 20(1), pages 94-116.

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    More about this item

    Keywords

    New Keynesian Phillips curve; price stickiness; real marginal cost; labour income share;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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