The Working Paper Series of the Czech National Bank (CNB) is intended to disseminate the results of the CNB's research projects as well as the other research activities of both the staff of the CNB and collaborating outside contributors, including invited speakers. The Series aims to present original research contributions relevant to central banks. It is refereed internationally. The referee process is managed by the CNB Research Department. The working papers are circulated to stimulate discussion. The views expressed are those of the authors and do not necessarily reflect the official views of the CNB.

Abstract:New concepts have been presented in modelling of inflation dynamics recently, among others the new Keynesian Phillips curve (NKPC). There are several traditional ways of NKPC model validity testing, but none of them seems to be practically applicable in conditions of the Czech Republic. We tried to test the validity of NKPC on the basis of time series. For this purpose we applied an interesting non-traditional method proposed by Demery and Duck. This method does not rely on direct estimation of NKPC parameters, but relatively easy tests based on the cointegration analysis of time series are employed. Its application indicates that the NKPC model cannot be considered as effective in conditions of the Czech Republic; this model does not describe the inflation process sufficiently and it is not a suitable model for inflation prediction or for the choice of appropriate monetary (antiinflation) policy.

In this paper we provide tools for assessing the house prices and housing valuation. We develop two approaches: (i) borrowing capacity approach, and (ii) intrinsic value approach. The borrowing capacity of households, together with their down payment, implies how much housing they can attain. In the intrinsic value approach, property value is viewed as a discounted present value of adjusted net rental income. Our approach does not involve a complex econometric model and only widely available data are used. The proposed indicators can guide households, financial markets and macroprudential authorities in their understanding of house prices development. To illustrate the concepts, we analyze the housing prices in the Czech Republic and assess the degree of market over-and undervaluation.

A sharp increase in unemployment accompanied by a relatively muted response of inflation during the Great Recession and a consecutive inflationless recovery cast further doubts on the very existence of the Phillips curve as a systemic relation between real activity and inflation. With the aid of dynamic model averaging, this paper aims to highlight that this relation resurfaces if (i) inflationary pressures are captured by a richer set of real activity measures, and (ii) one accounts for the existence of a non-linear response of inflation to the driving variable. Based on data for the US and other G7 countries, our results show that the relation between economic activity and inflation is quite sturdy when one allows for more complex assessment of the former. We find that measures of economic activity describe inflation developments to a varying degree across time and space. This can blur the picture of inflation–real economy comovements in models where only a single variable of economic activity is considered. The output gap is often outperformed by unemployment-related variables. Our results also confirm a weakening of the inflation–activity relationship (i.e. a flattening of the Phillips curve) in the last decade that is robust both across activity measures and across countries.

ÚvodV makroekonomických analýzách se často setkáváme s potřebou rozložit časovou řadu na trendovou a cyklickou složku. Tato potřeba vychází z požadavku oddělit od sebe dlouhodobý vývoj a fl uktuace s kratším horizontem. Obě složky jsou potom zpravidla ztotožněny s jistým (přímo neměřitelným) ekonomickým konceptem, přičemž trend je často chápán jako odhad vývoje rovnovážné veličiny a cyklická složka jako dočasná odchylka (mezera) od dlouhodobé rovnovážné trajektorie. V literatuře bylo navrže-no několik metod, jak k této problematice přistoupit, 1 přičemž navržené přístupy lze rozdělit do dvou základních skupin: i) čistě statistické modely, ii) modely vycházející ze strukturálních makroekonomických vztahů. Existují však také metody kombinující do jisté míry rysy obou přístupů.Pravděpodobně stále nejčastěji používaný způsob dekompozice časové řady v makroekonomické analýze je založen na aplikaci Hodrick-Prescottova fi ltru (Hodrick a Prescott 1980, 1997, dále HP fi ltr). I když nekritické použití HP fi ltru může být v důsledku některých nežádoucích vlastností 2 problematické, patřila jeho aplikace v posledním desetiletí ke standardu a i nadále se díky své jednoduchosti těší poměrně velké oblibě. Mezi často kritizované vlastnosti HP fi ltru patří jistá arbitrárnost ve volbě parametru vyhlazení, jehož hodnota se může výrazně promítnout do výsledků, dále zkreslení na koncích časové řady (end-point bias) a riziko vytváření neexistujících cyklů. V odborné literatuře již lze nalézt postupy, jak negativní dopady výše uvedených vlastností alespoň částečně minimalizovat. Jiným z obecných nedostatků HP fi ltru, který zatím nebyl uspokojivě řešen, je nemožnost kvantifi kovat míru nejistoty spojenou s odhadem.3 Výstupem HP fi ltru je pouze bodový odhad spjatý s konkrét-ním výběrem (časovou řadou), což nedovoluje učinit některé závěry obecnější po-

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1 Although the use of residential real estate macroprudential tools has become common in recent years, rigorous approaches to their calibration have been relatively scarce. The goal of this paper is to present an approach to (i) evaluating direct risks to financial stability related to residential real estate exposures, and to (ii) calibrating borrower-based macroprudential measures. First we present a macroprudential indicator of potential losses related to the provision of new mortgage loans. Then we show how to determine risky values of the loan-to-value, loan-to-income and loan service-to-income ratios by performing stress tests on the individual new mortgage loans. Finally, we demonstrate the applicability of this approach on the case of the Czech Republic. We conclude by showing that simultaneous adoption of several macroprudential measures may enhance their efficiency without imposing higher restrictions on the mortgage market.