The Role of Domestic and External Shocks in Poland: Results from an Agnostic Estimation Procedure
October 29, 2013
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Summary
This paper discusses interlinkages between Poland and the euro zone using a simple and agnostic econometric approach. Specifically, we estimate a trend-cycle VAR model using data for real and nominal variables, imposing powerful but uncontroversial assumptions that allow us to identify how external factors affect the evolution of business cycles in Poland in the period 1999-2012. Our results suggest that developments in the euro zone can explain about 50 percent of poland’s output and interest rate business cycle variance and about 25 percent of the variance of inflation.
Subject: Econometric analysis, Exchange rates, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Prices, Real exchange rates, Vector autoregression
Keywords: business-cycle fluctuation, Eastern Europe, euro zone, euro zone economy, euro zone variable, Exchange rates, external shocks, headline consumer price inflation, Inflation, inflation regime, inflation target, Inflation targeting, inflation variable, interest rate, modeling inflation deviation, open economy, Poland, price level, Real exchange rates, transmission mechanism, trend-cycle VAR, VAR model, Vector autoregression, WP
Pages:
22
Volume:
2013
DOI:
Issue:
220
Series:
Working Paper No. 2013/220
Stock No:
WPIEA2013220
ISBN:
9781484337172
ISSN:
1018-5941
