Inflation Dynamics in the Czech Republic: New Evidence on the Cost Based Hybrid New Keynesian Phillips Curve

New Keynesian form of the Phillips Curve assumes a shortterm trade-off between inflation and real economic activity, either in unit labour cost or output gap specification. Extending (NKPC) with backward-looking price setting, our aim is to examine impact expectations, lagged inflation, cost, import prices effective exchange rate on dynamics Czech Republic 2000M1 2020M12. Dealing non-stationary cointegrated time series, we opted for an Error Correction Model (ECM) Autoregressive Distributed Lag (ARDL) model variables integrated order I(1). ARDL differences was also compared levels. The main findings analysis can be summarized as follows. Firstly, indicates that using series generates spurious regression results. Secondly, results from ECM first differencing find expectations statistically significant, confirming existence small open economy NKPC Republic. Thirdly, even though setting represents cornerstone hybrid NKPC, have found no evidence We thereby reject version NKPC. Lastly, spite representing economy, observed weak statistical suggesting external factors (exchange rate, prices) influence