Causality between Actual and Expected Inflation in Central and Eastern Europe: Evidence Using a Heterogeneous Panel Analysis

Authors

Yingying Xu
Zhixin Lu
Chi-Wei Su
Jaime Ortiz, The University of Texas Rio Grande ValleyFollow

Document Type

Article

Publication Date

1-15-2021

Abstract

This study applies a panel Granger non-causality test to explore the causal relationships between actual and expected inflation in Czechia, Hungary, Latvia, Lithuania, Poland, and Romania. The empirical results for these Central and Eastern European (CEE) countries show significantly positive causalities running from actual to expected inflation. However, the effect of actual inflation on inflation expectation weakens in Hungary and Romania following a financial crisis, and causality is no longer significant for Czechia, Latvia, Lithuania, and Poland. Domestic policies remain important for the management of actual and expected inflation, regardless of the monetary policy regime adopted.

Comments

Original published version available at https://doi.org/10.1080/00128775.2020.1863821

Recommended Citation

Xu, Y., Liu, Z., Su, C.W. and Ortiz, J., 2021. Causality between actual and expected inflation in central and eastern europe: evidence using a heterogeneous panel analysis. Eastern European Economics, 59(2), pp.148-170. https://doi.org/10.1080/00128775.2020.1863821

Publication Title

Eastern European Economics

DOI

https://doi.org/10.1080/00128775.2020.1863821