2007
| 2007/4 | Inflation and Inflation Uncertainty in Latvia ( 450 KB) Viktors Ajevskis Abstract The paper considers interrelation between inflation and inflation uncertainty in Latvia. The monthly growth in CPI in the period from January 1994 to June 2007 has been used as an inflation measure. The application of the GARCH-M model with lagged inflation in GARCH equation proves that a positive relationship between inflation and inflation uncertainty does exist. It suggests that increased inflation uncertainty raises inflation, and, vice versa, increased inflation is a cause for higher uncertainty about inflation in the future. Key words: inflation, inflation uncertainty, GARCH-M JEL classification codes: C22, E31, E37 |
| 2007/3 | Estimation of the Phillips Curve for Latvia ( 882 KB) Aleksejs Melihovs, Anna Zasova Abstract The current paper aims at estimating the formation mechanism of business inflation expectations to find out how the latter affect the inflation dynamics. To attain this goal, the authors estimated the traditional Phillips curve, new Keynesian Phillips curve and hybrid Phillips curve. The results obtained testify to a better explanatory power to describe the dynamics of Latvia's core inflation of the hybrid Phillips curve compared with the traditional and new Keynesian Phillips curves. Moreover, the outcomes of the research indicate that companies in Latvia adjust their output prices quite frequently implying that the pass-through of changes in inflation expectations to actual prices is quite prompt. Key words: Phillips curve, new Keynesian Phillips curve, hybrid Phillips curve, inflation persistence JEL classification codes: C22, E31 |
| 2007/1 | Inflation Expectations in Latvia: Consumer Survey Based Results ( 1,21 MB) Konstantins Benkovskis, Daina Paula Abstract The objective of this study is the quantification of inflation expectations in Latvia using the results of consumer surveys and the assessment of the impact inflation expectations have on actual inflation. In order to attain the objectives set, the authors of the study quantified inflation expectations applying the widely accepted probability approach and produced a small-scale VAR model capturing actual inflation and the quantified inflation expectations. Both the surveyed balance sheet data and quantified values of inflation expectations confirm that inflation expectations strengthened substantially prior to Latvia's accession to the EU. The findings of the VAR model with inflation expectations indicate that inflation expectations have a statistically significant impact on inflation in Latvia. The response of inflation expectations to inflation and domestic demand shocks is positive, although a deviation implies that the response to a domestic demand shock is not statistically significant. Key words: inflation expectations, survey data, VAR model JEL classification codes: C32, C83, D84, E31 Extended research published: The Role of Inflation Expectations in the New EU Member States: Consumer Survey Based Results. Czech Journal of Economics and Finance, 2008, No. 58 (7-8), pp. 298-317. Available: http://journal.fsv.cuni.cz/mag/article/show/id/1133 |