— The paper study an alternative proxy for real marginal cost gap in the hybrid New Keynesian Phillips Curve in order to improve the empirical results and to provide a more detailed insight into the causes of inflationary process. The improved proxy distinguishes two types of inflation pressures coming from the real economy, one associated with the decreasing returns to production factors and the other one related to the position of real wage costs relative to their equilibrium level. Apart from testing the relative performance of an improved proxy of real marginal cost, the empirical analysis aims to evaluate the degree of inertia, the impact of forward looking expectations and the inflationary pressures steaming from real economy. To achieve these goals it is estimated a reduced form hybrid New Keynesian Phillips Curve for Romania and other three new Member States which present similarities between them: Czech Republic, Hungary and Poland.
— Inflation dynamics, new member states, hybrid new Keynesian Phillips curve, GMM estimation.
Bogdan Murarașu is with The Bucharest University of Economic Studies, Money and Banking Department, Bucharest, Romania (e-mail: firstname.lastname@example.org ).
Cite: Bogdan Murarașu, " An Analysis of Inflation Dynamics based on an Empirical Improved Proxy for Real Marginal Cost Gap in the New Keynesian Phillips Curve," Journal of Economics, Business and Management vol. 3, no. 12, pp. 1120-1125, 2015.