P-Star-Model Based Analysis of Inflation Dynamic in the Czech Republic.

The paper presents a version of the P* model of inflation dynamics for a small open economy and applies it to the Czech economy time series from the period of 1991-1999. The paper is organized as follows. Section 2 presents a brief discussion of the monetary policy indicators issue. Section 3 describes the logics of the P* model. Section 4 explains the extension of the basic model to the case of a small open economy. Section 5 applies the model to the Czech economy data and presents the estimates of the Czech inflation dynamics determination.