Modeling inflation in Poland

The paper presents two different, aggregate models of inflation. The first is specified entirely in growth rates and thus excludes the long run effect s. However, it allows for the analysis of turning points (shifts). The veri fication of the hypothesis of the threshold effect of prices led to endogen ous switching model which was estimated by Bayesian methods. The second mod el has the VAR structure and was meant to identify the long-run relationshi ps between wages, prices, labor productivity, and unemployment. It was esti mated and analyzed by the Johansen method. Moreover, identifying restrictio ns were introduced which helped to obtain fully economically interpreted sy stem of equations (SVAR). The empirical investigation is based on the Polis h quarterly data covering the period from 1991 to 1996. (C) 2000 Elsevier S cience B.V. All rights reserved.