engleski

The Convergence Analysis of Inflation and Unemployment Rates

In the paper the time paths of the Croatian rates of inflation and unemployment are estimated. The model is based on three first-order differential i.e. difference equations and on the adaptive expectation hypothesis, what results with second-order differential i.e. difference equations for each variable. The data of the rate of inflation and the rate of unemployment are used for parameters estimation, while the expected rate of inflation are estimated by VAR model. The parameters of adaptive-expectations equations are estimated by standard methods. On the basis of the estimated time paths the stability and convergence analysis is done for the rate of inflation and the unemployment rate.

inflation; unemployment; differential and difference equations; VAR; convergence analysis

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