Economic Models - Convex Optimization
Economic Models - Convex Optimization
Economic Models - Convex Optimization
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
estrictive model are<br />
⎧<br />
ŷ t = 0.021<br />
⎪⎨<br />
+ 0.454y t−1<br />
(0.009)<br />
⎪⎩<br />
Inflation Control in Central and Eastern European Countries 189<br />
(0.154)<br />
̂π t =−0.57π t−1<br />
(0.19)<br />
− 0.0029y t−1<br />
(0.001)<br />
− 0.76π t−2<br />
(0.13)<br />
− 0.47π t−3 + 16.09(q t−1 − q t−5 )<br />
(0.20)<br />
(7.23)<br />
over the period 1995Q1–2004Q1 for the AD, and 1998Q1–2004Q1 for<br />
the PC, very similar then to the estimates on the longer sample. For the PC<br />
equation, we also present the alternative specification<br />
̂π t =−0.66π t−1<br />
(0.20)<br />
− 0.78π t−2<br />
(0.13)<br />
+ 19.22(q t−1 − q t−5 )<br />
(7.46)<br />
− 0.59π t−3 + 39.24π t−1<br />
(0.20) (29.00)<br />
estimated over the sample 1998Q1–2004Q1: the lagged output gap still<br />
appeared in the determinants of the inflation dynamics, it had the correct<br />
sign and it was also marginally significant with the 10% critical value and a<br />
one-sided t test: a possible interpretation of this result could be that by 1998,<br />
the PC equation evolved even closer to the standard textbook specification,<br />
but we think that a longer dataset is needed to address this particular issue.<br />
In any case, considering the whole model, we confidently conclude that<br />
the Polish monetary authority was able to control inflation during these<br />
years, but we think it mainly worked through the exchange rate management,<br />
the evidence of the closed economy transmission mechanism, in fact,<br />
being dubious.<br />
3.3. Czech Republic<br />
Czech Republic originated in 1993, from the split of the former Czechoslovakia.<br />
Data availability is then slightly reduced, and it is also possible that<br />
the division of the country acted as a source of instability additional to the<br />
one generated to the transition. Although it is not possible to distinguish<br />
between these two causes, the evidence of instability of the macroeconomic<br />
structure was quite clear.<br />
The sample for the estimation of theAD equation started in 1994Q4, but<br />
we found that a break took place around 1999, according to the CUSUMsq<br />
statistic. This is approximately also the point for which the Chow test is<br />
to be computed, and we found strong evidence in favor of it (the P-value<br />
associated to it was 0.01). Comparing the estimates in the two sub-samples,
Change language