Inflation Convergence and the New Keynesian Phillips Curve in the Czech Republic

Wirtschaftswissenschaften

Fidrmuc, Jarko, Danisková, Katharína

Inflation Convergence and the New Keynesian Phillips Curve in the Czech Republic

Fidrmuc, Jarko, Danisková, Katharína: Inflation Convergence and the New Keynesian Phillips Curve in the Czech Republic, AUCO Czech Economic Review, 2011 (5): 99-115.

Originalarbeiten in wissenschaftlichen Fachzeitschriften

The New Keynesian Phillips Curve has become an important part of modern monetary policy models. It describes the relationship between inflation and real marginal cost, which is derived from micro-founded models with rational expectations, sticky prices, and forward and backward looking behaviour. This answers the previous critique of the Phillips Curve. We estimate several specifications of the New Keynesian Phillips Curve for the Czech Republic between 1996 and 2009. We show that the GMM suffers under the problem of weak instruments leading to biased estimates. In turn, the FIML is robust and yields significant estimates of structural parameters implying a strong forward looking behaviour

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