A Comparative Analysis of the Czech Republic and Hungary. Using small Continuous-Time Macroeconometric Models

Abstract

In this paper we estimate a continuous-time macroeconometric model of the Hungarian economy and compare it with the Czech model described in Stavrev (1998). On the basis of the estimated models we provide simulations and compare the results between the two countries for i) anti-inflationary policy; ii) monetary and fiscal policies; iii) the effect of different wage indexation schemes; iv) the effect of nominal wage rigidities and v) the effect of price and nominal wage freeze.Lucas critique, Policy simulations, Macroeconometric model, Anti-inflationary policy, Effectiveness of monetary and fiscal policies