An impact of inflation on the neo-Keynesian Phillips curve - the case of The Republic of Serbia
Abstract
Phillips curve has become systematic instrumentation that elaborates macroeconomic analysis showing relations between unemployment and inflation, illustrating the trade-off between achieving full capacity engagement and maintaining price stability.
The New Keynesian Phillips curve presumes that expectations of inflation are not adaptive and rational, as withheld from Lucas’s theory. ANew Keynesian Phillips curve was there as a result has emerged which is distinctive from the curve modeled by Phelps and Friedman
In 2023 counting a peak of 16.2% in March, inflation rate gently declined to 10.2% in September, and helped by reducing pressure from food prices. Projected inflation is to decelerate further till the end of 2023 and in next year, based on effects and tighter financing conditions. Although some increase in 2023 is evident, approximate yearly inflation is expected to be single digits in 2024, returning within the central bank’s target in two years.
This paper will present The New Keynesian Phillips curve in the Republic of Serbia (Serbia), as well as macroeconomics predictions in the country.
References
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2.Baqaee, D., Farhi, E., and Sangani, K. (2021). The supply-side effects of monetary policy. NBER Working Papers 28345, National Bureau of Economic Research.
3. Blanchard, O., Galí, J., 2007, Real wage rigidities and the New Keynesian model Journal of Money, Credit and Banking 39(1): 35-65.
4.Blanchard, O. (2016). The Phillips Curve: Back to the '60s? American Economic Review, 106 (5): 31–34.
5. Bergholt, D., Furlanetto, F., and Vaccaro-Grange, E. (2023). Did monetary policy kill the Phillips curve? Some simple arithmetics. Working Paper 2023/2, Norges Bank.
6.Borio, C., Disyatat, P., Xia, D., and Zakrajšekicon., E. (2021). Second-round effects feature less prominently in inflation dynamics. Box in September 2021 BIS Quarterly Review.
7.Broadbent, B., (2020). Inflation and beliefs about inflation. Speech given at the London Business School
7.Calvo, Guillermo A., 1983, Staggered Prices in a Utility Maximizing Framework Journal of Monetary Economics 12(3): 383-398
8.Coibion, Olivier, and Yuriy Gorodnichenko. (2015). Is the Phillips Curve Alive and Well after All? Inflation Expectations and the Missing Disinflation. American Economic Journal: Macroeconomics, 7 (1): 197–232
9. Del Negro, M., Lenza, M., Primiceri, G. E., and Tambalotti, A. (2020). What’s up with the Phillips Curve? NBER Working Papers 27003, National Bureau of Economic Research
10.Furtula S., Drakulic D, Simionescu M., (2018) Testing Phillips Curve For Serbian And Romanian Economy, Romanian Statistical Review nr. 3 / 2018.pg.40-44. https://www.revistadestatistica.ro/wp-content/uploads/2018/09/RRS-3_2018_A4.pdf
11.Goodhart, C., and Pradhan, M. (2020). The great demographic reversal: Ageing societies, waning inequality, and an inflation revival. Springer Nature.
12. Heise, S., Karahan, F., and Şahin, A. (2022). The Missing Inflation Puzzle: The Role of the Wage‐Price Pass‐ Through. Journal of Money, Credit and Banking, 54(S1), 7–51.
13. Kliestik, T., Kocisova, K., Misankova, M., 2015, Logit and Probit Model used For Prediction of Financial Health of Company, Procedia Economics and Finance, 23: 850-855. DOI: 10.1016/S2212-5671(15)00485-2
14. Lombardi, M. J., Riggi, M., and Viviano, E. (2020). Bargaining power and the Phillips curve: a micro-macro analysis. BIS Working Papers 903, Bank for International Settlements
15. Lucas, R. E., Rapping, L. A., 1969, Price expectations and the Phillips curve The
American Economic Review 59(3): 342-350.
16.Norkute, M., 2015, Can the sectoral New Keynesian Phillips curve explain infl ation dynamics in the Euro Area? Empirical Economics 49(4): 1191-1216.
17.Palley, T., 2012, The economics of the Phillips curve: Formation of infl ation expectations versus incorporation of infl ation expectations Structural Change and Economic Dynamics 23(3): 221-230
18. Phillips, A. W., 1958, The Relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1861–1957 Еconomica 25(100): 283- 29
19. Pošta, V., 2015, Semi-structural estimates of time-varying NAIRU based on the new Keynesian Phillips curve: evidence from Eastern European economies Empirical Economics 49(4): 1217-1243 .
20. Roberts, J. M., 1995, New Keynesian economics and the Phillips curve Journal of money, credit and banking 27(4): 975-984.
21. Roegera W., Herzb B. (2023) Traditional versus New Keynesian Phillips Curves: Evidence from Output Effects, Inerantional journal of central banking,https://www.ijcb.org/journal/ijcb12q2a3.pdf
22. Rotemberg, J., 1982, Monopolistic Price Adjustment and Aggregate Output Review of Economic Studies 49(4): 517-531.
23. Rudd, J., Whelan, K., 2005, New tests of the new-Keynesian Phillips curve Journal of Monetary Economics 52(6): 1167-1181.
24. Samuelson, P. A., Solow, R. M., 1960, Analytical aspects of anti-infl ation policy The American Economic Review 50(2):177-194
25. Simionescu, M., 2016, Competitiveness and Economic Growth in Romanian Regions. Journal of Competitiveness, 8(4), 46-60.
26. Simionescu, M., Lazányi, K., Sopková, G., Dobeš, K., & Adam, P. B., 2017, Determinants of economic growth in V4 countries and Romania. Journal of Competitiveness, 8(1)
27. Taylor., John B., 1980, Aggregate Dynamics and Staggered Contracts Journal of Political Economy 88(1): 1-22.
https://ec.europa.eu/economy_finance/forecasts/2023/autumn/autumn_forecast-2023_rs_en.pdf
2.Baqaee, D., Farhi, E., and Sangani, K. (2021). The supply-side effects of monetary policy. NBER Working Papers 28345, National Bureau of Economic Research.
3. Blanchard, O., Galí, J., 2007, Real wage rigidities and the New Keynesian model Journal of Money, Credit and Banking 39(1): 35-65.
4.Blanchard, O. (2016). The Phillips Curve: Back to the '60s? American Economic Review, 106 (5): 31–34.
5. Bergholt, D., Furlanetto, F., and Vaccaro-Grange, E. (2023). Did monetary policy kill the Phillips curve? Some simple arithmetics. Working Paper 2023/2, Norges Bank.
6.Borio, C., Disyatat, P., Xia, D., and Zakrajšekicon., E. (2021). Second-round effects feature less prominently in inflation dynamics. Box in September 2021 BIS Quarterly Review.
7.Broadbent, B., (2020). Inflation and beliefs about inflation. Speech given at the London Business School
7.Calvo, Guillermo A., 1983, Staggered Prices in a Utility Maximizing Framework Journal of Monetary Economics 12(3): 383-398
8.Coibion, Olivier, and Yuriy Gorodnichenko. (2015). Is the Phillips Curve Alive and Well after All? Inflation Expectations and the Missing Disinflation. American Economic Journal: Macroeconomics, 7 (1): 197–232
9. Del Negro, M., Lenza, M., Primiceri, G. E., and Tambalotti, A. (2020). What’s up with the Phillips Curve? NBER Working Papers 27003, National Bureau of Economic Research
10.Furtula S., Drakulic D, Simionescu M., (2018) Testing Phillips Curve For Serbian And Romanian Economy, Romanian Statistical Review nr. 3 / 2018.pg.40-44. https://www.revistadestatistica.ro/wp-content/uploads/2018/09/RRS-3_2018_A4.pdf
11.Goodhart, C., and Pradhan, M. (2020). The great demographic reversal: Ageing societies, waning inequality, and an inflation revival. Springer Nature.
12. Heise, S., Karahan, F., and Şahin, A. (2022). The Missing Inflation Puzzle: The Role of the Wage‐Price Pass‐ Through. Journal of Money, Credit and Banking, 54(S1), 7–51.
13. Kliestik, T., Kocisova, K., Misankova, M., 2015, Logit and Probit Model used For Prediction of Financial Health of Company, Procedia Economics and Finance, 23: 850-855. DOI: 10.1016/S2212-5671(15)00485-2
14. Lombardi, M. J., Riggi, M., and Viviano, E. (2020). Bargaining power and the Phillips curve: a micro-macro analysis. BIS Working Papers 903, Bank for International Settlements
15. Lucas, R. E., Rapping, L. A., 1969, Price expectations and the Phillips curve The
American Economic Review 59(3): 342-350.
16.Norkute, M., 2015, Can the sectoral New Keynesian Phillips curve explain infl ation dynamics in the Euro Area? Empirical Economics 49(4): 1191-1216.
17.Palley, T., 2012, The economics of the Phillips curve: Formation of infl ation expectations versus incorporation of infl ation expectations Structural Change and Economic Dynamics 23(3): 221-230
18. Phillips, A. W., 1958, The Relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1861–1957 Еconomica 25(100): 283- 29
19. Pošta, V., 2015, Semi-structural estimates of time-varying NAIRU based on the new Keynesian Phillips curve: evidence from Eastern European economies Empirical Economics 49(4): 1217-1243 .
20. Roberts, J. M., 1995, New Keynesian economics and the Phillips curve Journal of money, credit and banking 27(4): 975-984.
21. Roegera W., Herzb B. (2023) Traditional versus New Keynesian Phillips Curves: Evidence from Output Effects, Inerantional journal of central banking,https://www.ijcb.org/journal/ijcb12q2a3.pdf
22. Rotemberg, J., 1982, Monopolistic Price Adjustment and Aggregate Output Review of Economic Studies 49(4): 517-531.
23. Rudd, J., Whelan, K., 2005, New tests of the new-Keynesian Phillips curve Journal of Monetary Economics 52(6): 1167-1181.
24. Samuelson, P. A., Solow, R. M., 1960, Analytical aspects of anti-infl ation policy The American Economic Review 50(2):177-194
25. Simionescu, M., 2016, Competitiveness and Economic Growth in Romanian Regions. Journal of Competitiveness, 8(4), 46-60.
26. Simionescu, M., Lazányi, K., Sopková, G., Dobeš, K., & Adam, P. B., 2017, Determinants of economic growth in V4 countries and Romania. Journal of Competitiveness, 8(1)
27. Taylor., John B., 1980, Aggregate Dynamics and Staggered Contracts Journal of Political Economy 88(1): 1-22.
https://ec.europa.eu/economy_finance/forecasts/2023/autumn/autumn_forecast-2023_rs_en.pdf