Kybernetika

A Phillips curve relating inflation and unemployment rates is a usual way how to study the development of inflation. Another approach is applied by modelling mutual influence between inflation and aggregate demand. Any observed relation among inflation and other factors should reflect the price expectations of firms and households which can be formalized by an adaptive or rational expectations hypothesis.

A stabilization program is performed by the Czech Republic government by a control of the inflation by an aggregate demand. Respecting this fact an attempt is made here to model inflation with domestic data.