NATIONAL BANK OF POLAND WORKING PAPER No. 86

NATIONAL BANK OF POLAND WORKING PAPER No. 86 Compeiiveness channel in Poland and Slovakia: a pre-emu DSGE analysis Andrzej Torój Warsaw 2

Andrzej Torój Minisry of Finance in Poland andrzej.oroj@mofne.gov.pl) and Warsaw School of Economics andrzej.oroj@dokoran.sgh.waw.pl). The views expressed are hose of he auhor and do no necessarily reflec hose of he insiuions he is affliaed wih. The auhor is graeful o Marcin Kolasa and Marek Rozkru, whose commens were criical o successful compleion of his sudy, as well as o an anonymous Referee, he paricipans of 4h Annual Inernaional Conference on Macroeconomic Analysis and Finance in Rehymno, 36h Macromodels Inernaional Conference, NBP seminar and SENAMEK seminar a Warsaw School of Economics, for fruiful discussions. The auhor is also graeful o Agnieszka Sążka-Gawrysiak and Tomasz Łyziak for heir help regarding pas inflaion arge daa. Design: Oliwka s.c. Layou and prin: NBP Prinshop Published by: Naional Bank of Poland Educaion and Publishing Deparmen -99 Warszawa, /2 Święokrzyska Sree phone: +48 22 653 23 35, fax +48 22 653 3 2 Copyrigh by he Naional Bank of Poland, 2 hp://www.nbp.pl 2

Conens 6 8 3 3 3 7 8 9 2 2 2 22 24 24 25 27 37 42 47 WORKING PAPER No. 86 3

Lis of Figures and Tables 8 38 4 4 42 45 3 3 32 34 36 45 4 N a i o n a l B a n k o f P o l a n d

Absrac 5.% 3.4% 5.% 3.4% WORKING PAPER No. 86 5

Inroducion 6 N a i o n a l B a n k o f P o l a n d

Inroducion WORKING PAPER No. 86 7

Why does he MCI-raio maer for he adjusmen dynamics? 2,2,,,8,6,4,56,58,73,48,42,37,33,2, EA GR 2) SI 27) CY 28) MT 28) 29) EE 2) i = γ π π + γ y y i π y γ π > γ π < π = wπ + w) π 2 γ π w 8 N a i o n a l B a n k o f P o l a n d

i = γ π π + γ y y i π y Why does he MCI-raio maer for he adjusmen dynamics? γ π > γ π < π = wπ + w) π 2 γ π w 2 2.5 3.% % 2% 4 39 38 37 K/EUR cenral pariy 36 35 34 33 32 3 σ 3 25-26-2 26-5 26-8 26-27-2 27-5 27-8 27-28-2 28-5 28-8 WORKING PAPER No. 86 9

4 39 38 37 Why does he MCI-raio maer for he adjusmen dynamics? K/EUR cenral pariy 36 35 34 33 32 4 3 39 4 3 38 39 37 38 25-26-2 26-5 26-8 26-27-2 27-5 27-8 27- K/EUR 28-2 28-5 cenral K/EUR pariy cenral pariy 28-8 36 37 2 35 36 34 35 33 34 32 33 3 32 3 3 3 25-25- 26-2 26-2 26-5 26-5 26-8 26-8 26-26- 27-2 27-2 27-5 27-5 27-8 27-8 27-27- 28-2 28-2 28-5 28-5 28-8 28-8 N a i o n a l B a n k o f P o l a n d

Why does he MCI-raio maer for he adjusmen dynamics? 2 WORKING PAPER No. 86

Why does he MCI-raio maer for he adjusmen dynamics? 2 2 N a i o n a l B a n k o f P o l a n d

DSGE model seup w; ; ; w w w; ; ; w w 3 σ σ σ σ U C,N,H )=ε d, C H ) σ σ N +φ ε l, +φ C H N σ> φ> H = hc WORKING PAPER No. 86 3 h [; )

DSGE model seup U C,N,H )=ε d, C H ) σ σ N +φ ε l, +φ C H N σ> φ> h [; ) H = hc C [ κ) δ C δ δ T, + κ δ ] δ δ δ C δ N, 3 κ ; ) δ> C H, C F, C T, [ α) η C η η H, ] η + α η η η C η F, α η > α ; k C H, C H, C H, w ) ˆ ε T ˆ w ) εt C j H,,k dj ε T dk ε T ε T CH, w ) ˆ ε T ˆ w ) εt C j H,,k dj ε T dk ε T ε T j ε T > k j C F, C F, C F, w ) ˆ ε T ˆ w ) εt C j F,,k dj ε T dk ε T ε T CF, w ) ˆ ε T ˆ w ) εt C j F,,k dj ε T dk ε T ε T ε T CN, CN, 4 N a i o n a l B a n k o f P o l a n d ε

DSGE model seup C F, C F, C F, w ) ˆ ε T ˆ w ) εt C j F,,k dj ε T dk ε T ε T CF, w ) ˆ ε T ˆ w ) εt C j F,,k dj ε T dk ε T ε T ε T CN, CN, C N, w ) ˆ ε N ˆ w ) εn C j N,,k dj ε N dk ε N ε N CN, w ) ε N ˆ ˆ w ε ) N C j N,,k dj ε N dk ε N ε N ε N ε N 3 E β U C,N,H ) max C,N β, ) + w w P j H,,k Cj H,,k dj dk + P j w F,,k Cj F,,kdj dk+ P j N,,k Cj N,,k dj dk + E {Q,+ D + } D + W N D W T P + Q,+ k C H,,k = w PH,,k P H, ) εt C H, C H,,k = w PH,,k k P H, ) εt C H, C F,,k = w C N,,k = w PF,,k P F, PN,k P N ) εt C F, C F,,k = w ) εn C N C N,,k = w PF,,k P N,k WORKING PAPER No. 86 ) ) 5 η η PH, C H, = α) C T, CH, = α P H, C P T, PT, T, P N P F, ) εt C F, ) εn C N,

H, H, k DSGE model seup C F,,k = w PF,,k P F, ) εt C F, C F,,k = w PF,,k P F, ) εt C F, C N,,k = w PN,k P N ) εn C N C N,,k = w P N,k P N ) εn C N, C H, = α) PH, P T, ) η C T, CH, = α P H, PT, ) η C T, 3 C F, = α C T, = κ) PF, P T, PT, P ) η C T, C F, = α ) P F, P T, ) η C T, ) δ P ) δ C CT, = κ T, ) C P C N, = κ PN, P ) δ P ) δ C C N, = κ N, C P C H ) σ N ϕ ε l ε d = W P C H ) σ N ϕ ε l ε d = W P P H, [ w ˆ ˆ w ) εt P j H,,k dj dk ] ε T P H, [ w ˆ ˆ w ) ] εt ε T P j H,,k dj dk [ P F, w ˆ ˆ ) εt P j F,,k dj dk w ] ε T P F, [ w ˆ ˆ w ) εt ] ε T P j F,,k dj dk P T, [ α) P η H, ] + αp η η F, P T, [ α ) P η F, ] + α P η η H, P N, w ˆ ˆ w εn P N,,k dj) dk ) ε N P N, w ˆ ˆ w P N,,kdj ) εn ) ε N dk 6 P [ κ) P δ T, ] + κp δ δ N, N a i o n a l B a n k o f P o l a n d ] δ P [ κ ) P δ T, + κ P δ N,

C + P + P F, DSGE model seup w ˆ ˆ w P j F,,k dj ε T dk ε T P F, ˆ w ˆ w P j F,,k dj εt dk ε T P T, [ α) P η H, ] + αp η η F, P T, [ α ) P η F, ] + α P η η H, P N, w ˆ ˆ w εn P N,,k dj) dk ) ε N P N, w ˆ ˆ w P N,,kdj ) εn ) ε N dk P [ κ) P δ T, ] + κp δ δ N, P [ κ ) P δ T, ] + κ P δ δ N, π T, = α) π H, + απ F, π = κ) π T, + κπ N, π T, = α ) π F, + α π H, π = κ ) π T, + α π N, 3 C H,,k = w α) κ) PH,,k P H, ) εt ) η ) δ PH, PT, C P T, P C F,,k = α κ) w PF,,k P F, ) εt ) η ) δ PF, PT, C P T, P C N,,k = w κ PN,,k P N, ) εn ) δ PN, C P Q,+ V,+ ξ,+ V,+ + ξ,+ + V,+ P ε d, C H ) σ = ξ,+ βε d,+ C + H + ) σ P + WORKING PAPER No. 86 7

Q,+ ξ,+ P V,+ + DSGE model seup ξ,+ + V,+ P ε d, C H ) σ = ξ,+ βε d,+ C + H + ) σ P + C + P + Q,+ 3 β ε d,+ ε d, ) σ ) C+ hc P = Q,+ C hc P + I E Q,+ ) [ ) σ ) ] ε d,+ C+ hc P I = βe ε d, C hc P + c hc = E c + hc ) h σ [i E p + p )+lnβ]+ h σ ε d, E ε d,+ ) c = h +h c + +h E c + h + h) σ i E π + ρ)+ h + h) σ ε d, E ε d,+ ) i lni E π + = E p + p β ρ = lnβ S P H, P F, S = 8 s = p H, p F, N a i o n a l B a n k o f P o l a n d

DSGE model seup S P H, P F, S = s = p H, p F, X P T, P N, x = p T, p N, 3 p T, = p H, αs p = p T, κx = p N, + κ) x Q q q = p p = α α ) s κx + κ x Q q V,+ ε P d, C H ) σ ) = ξ,+ β ε d,+ C + H+ σ P+ β ε d,+ ε d, C + h C C h C ) σ ) P = Q P+,+ WORKING PAPER No. 86 9

DSGE model seup ε d, C hc ) σ = ϑ ε d, C h C ) σ Q ϑ = ϑ = 3 σ h c hc ) ε d, = σ ) c h h c ε d, q k Y H,k = A H N H,kε H Y N,k = A N N N,kε N N lna H a H ε H ε N mpn w mc H w p H mpn H mc N w p N mpn N N mc H = w p H, a H + ε H ) mc N = w p N, a N + ε N ) 2 N a i o n a l B a n k o f P o l a n d mc H = w p )+p p T, )+p T, p H, ) a H + ε H = w p ) αs κx a H + ε H) ) =

DSGE model seup N mc H = w p H, a H + ε H ) mc N = w p N, a N + ε N ) mc H = w p )+p p T, )+p T, p H, ) a H + ε H = w p ) αs κx ) a H + ε H ) = mc N = w p )+p p N, ) ) a N + ε N = = w p )+ κ) x ) a N + ε N 3 θ θ θ p H = θ H p H + θ H) p H p N = θ N p N + θ N) p N p H p N θ ω ω p H = ω H p H b, + ω H) p H f, p N = ω N p N b, + ω N) p N f, p H b, = p H + π H p N b, = p N + π N WORKING PAPER No. 86 2

ω DSGE model seup p H = ω H p H b, + ω H) p H f, p N = ω N p N b, + ω N) p N f, p H b, = p H + π H p N b, = p N + π N p H f, = µ H + βθ H) ) βθ H s ) E mc H +s + p H,+k s= 3 µ T ln εt ε T p N f, = µ N + βθ N) ) βθ N s ) E mc N +s + p N,+k s= µ N ln εn ε N mc π H = ω H θ H +ω H [ θ H β)] πh + + ωh ) θ H ) βθ H ) mc H θ H +ω H [ θ H β)] π N = ω N θ N +ω N [ θ N β)] πn + + ωn ) θ N ) βθ N ) mc N θ N +ω N [ θ N β)] βθ H θ H +ω H [ θ H β)] E π H ++ βθ N θ N +ω N [ θ N β)] E π N ++ mc k w Y j H,,k dj = w Cj H,,k dj + w Cj H,,k dj = = C H,,k + CH,,k = ) = α) κ) εt ) η ) δ PH,,k PH, PT, C w P H, P T, P + ) + εt ) η w α κ PH,,k PH, P ) δ ) T, P H, C PT, P = ) εt PH,,k PH, [ α) κ) = w P H, +α κ ) PH, P T, ) η P T, P ) δ ) η ) δ PT, C P T, P + C ] 22 Y H ˆ ˆ w ) ε T Y j H,,k dj ε T dk ε T ε T N a i o n a l B a n k o f P o l a n d

DSGE model seup = w PH,,k ) + εt ) η w α κ PH, P ) δ ) T, P H, C PT, P = ) εt ) η ) δ PH,,k PH, PT, P H, [ α) κ) C P T, P + ) η +α κ PH, P ) δ ) T, C P ] P T, Y H ˆ ˆ w ) ε T Y j H,,k dj ε T dk ε T ε T ) η ) δ Y H PH, PT, = α) κ) C P T, P + α κ ) = α) κ) S αη X κδ PH, PT, C + α κ ) S α )η X κ δ C ) η P ) δ T, C P = F 3 ) η ) δ Y F PF, PT, = α κ) C P T, P + α ) κ ) = α κ) S α)η X κδ PF, PT, C + α ) κ ) S α η X κ δ C ) η P ) δ T, C P = C = w C w y H = wc + w) c [ wαη + w) α ) η ] s wκδx w) κ δ x y F = w c + w ) c +[ w α) η + w ) α η ] s w κδx w ) κ δ x w = w α) κ) w α) κ)+ w) α κ ) w = wα κ) wα κ)+ w) α ) κ ) Y N, = C N, = κ PN, P ) δ P ) δ C YN, = CN, = κ N, C P Y N, = κx κ)δ C Y N, = κ X ) κ )δ C y N = κ) δx + c y N = κ ) δ x + c WORKING PAPER No. 86 a T 23 a N a T a N y T y N

P N, N, P DSGE model seup Y N, = κx κ)δ C Y N, = κ X ) κ )δ C y N = κ) δx + c y N = κ ) δ x + c a T a N a T a N y T y N 3 i = ρ + γ ρ )γ π π + γ y ỹ )+γ ρ i i ỹ π γ ρ ; ) γ π >, γ y > γ π > π = ỹ = ˆ ˆ π j dj = wπ + w) π ỹ j dj = wỹ + w)ỹ mrs w p mrs mrs Uc,n) n Uc,n ) = σ h c hc )+φn + ε l ε d c 24 N a i o n a l B a n k o f P o l a n d n = N N N nn + N H N nh = Y N A N Y N A N + Y T T A T n N + Y A T Y N n H A N + Y T A T

DSGE model seup mrs w p mrs mrs Uc,n) n Uc,n ) = σ h c hc )+φn + ε l ε d c n = N N N nn + N H N nh = Y N A N Y N A N + Y T T A T n N + Y n H A T Y N A N + Y T A T κn N + κ) n H = κy N + κ) y H κa N κ) a H κε N κ) ε H N j 3 ε w N N [ ) ˆ εw w w ) ] εw N εw εw εw j, dj W [ w ˆ w θ w ; ) ] W εw εw j, dj ω w ; ) π w = βe π w + + θw ) βθ w ) θ w [ + φε w ] [mrs w p )] ω w βπ π ) ε D ε T ε N WORKING PAPER No. 86 25 ε l ε i

DSGE model seup ε D ε T ε N ε l ε i 3 26 N a i o n a l B a n k o f P o l a n d

Esimaion 4 AE x + = Bx + Cε x = Mx + Nε AE x + = Bx + Cε M n n A, B, C) N n n A, B, C) n x = Mx + Nε M n n A, B, C) N n n ε A, = Φε B, C) + ξn Φ ε N, D) T R [ x, f ] [ ] [ ] [ I N M = I Φ } {{ } T x, f ] [ ] [ ] I N + I I } {{ } R ε y = Zx, + d + ɛ WORKING PAPER No. 86 27 ɛ N, H) d Z y x, y H y N

Esimaion ε = Φε + ξ ε = Φε + ξ Φ ε N, D) Φ ε N, D) T T R R [ [ x, xf, f ] [ ] [ ] [ ] [ I N ] [ M = ] [ I N I M Φ = } {{ } I T Φ } {{ } T x, xf, f ] [ ] [ ] ] [ I N ] [ + ] I N I I + } {{ } I R I } {{ } R ε ε y = Zx, + d + ɛ 4 y = Zx, + d + ɛ ɛ N, H) d Z ɛ N, H) y d x, Z y y H x, y N y F y N c c π H π N π F π N i w w y F y N c c π H π N π F π N i w w y H y N a = Ta a = Ta P = TP T T + RDR T P = TP T T + RDR T y = Za + d y = Za + d υ = y y υ = y y F = ZP Z T + H ɛ ε L [y, A, B, C, Φ, D, H, d] = Tn 2 ln 2π) 2 ln D + T 2 T ln F 2 = T = υ T F υ d H A B C Φ D 28 ˆθ ) ) D ˆθ = 2 L [θ] 2 N a i o n a l B a n k o f P o l a n d

2 2 2 = 2 = Esimaion d H A B C Φ D ) ) D ˆθ = 2 L [θ] 2 ˆθ 4 WORKING PAPER No. 86 29 e

Esimaion e 4 Γ h Γ σ Γ s Γ x Γ x Γ ω Γ θ Γ ω Γ θ Γ ω Γ θ Γ φ ŷ H = Γ h y H + Γ h ) y+ H Γ i i E π + ρ)+ w) c h +h c Γ s s h +h s +h E s + ) Γ x x h +h x +h E x + ) Γ x ˆπ W = E π+ W ω ) [ W π C π C +Γ θ W s ˆπ s = Γ ω s π H + θs θ s +ω s π s + +Γ θ smc s ˆσ ĥ ) ] c ĥc w p ) +Γ φ W y ) +h E c + + x h +h x +h E x + ) 3 N a i o n a l B a n k o f P o l a n d

e Esimaion y H y N c 4 π H π N y H y N c π H π N π W i e π W y H y N c π H π N π W i e i e. y H y N c π H π N π W i e..5 i = ˆ ρ i i )+ ˆ i ρ ˆ =.3.2 WORKING PAPER No. 86 3 ˆ i i 29Q = i 29Q

Esimaion y H y N c π H π N π W i e ˆ i y H y N c i = ρ ˆ π H i i π )+ i N ˆ π W i e ˆ ρ =.3.2 i 29Q = i 29Q y H y N c π H π N π W i e...5 y H y N c π H π N π W i e α α 4 y H y N c π H π N π W i e. ˆ i y H y N c π H π N π W i e i = ρ ˆ i i )+ i ˆ..5 ˆ ρ =.3.2 i 29Q = i 29Q ˆ i α α κ i = ρ ˆ i i )+ i ˆ β ρ ˆ =.3.2 φ W i 29Q = i 29Q 3. φ /σ ω θ h α α.66 32 h.57 N a i o n a l B a n k o f P o l a n d.84

Esimaion φ /σ ω θ h.66 h.57.84 h.62.38.742..2.82 4.4.98.69.58.38.72.48.5.69.62.89 θ W =.28 σ = 3.9 2.59 WORKING PAPER No. 86 33 φ

Esimaion Parameers \ Region EA κ β α α h ω T ω N η δ η φ σ 4 ω W θ T θ N θ W γ π γ y.58.38.72.48 γ ρ ρ c ρ T ρ NT.5.69 σ 2 c ρ i ρ w ρ i.62.89 θ W =.28 σ 2 π Tσ 2 π NTσ 2 πnt σ 2 i σ 2 e σ = 3.9 2.59 φ fl.4 η =.44 η =.52 η =.73 η = 34 N a i o n a l B a n k o f P o l a n d

φ Esimaion.4 η =.44 η =.52 η =.73 η = δ.65. δ.65. 4 h σ h σ wαη + w) α ) η wαη + w) α ) η WORKING PAPER No. 86 35

Esimaion.7;.64).2;.68).497;.5).435;.22).22;.82).6;.92).8;.64).58;.233).747;.278).697;.332).87;.225).67;.24) 4 36 N a i o n a l B a n k o f P o l a n d

Adjusmen dynamics under EMU: IRF analysis C N C N 5.6% σ.6% WORKING PAPER No. 86 37

Adjusmen dynamics under EMU: IRF analysis 5.6.4.2.2.5..5.5...5 oupu NT 9%CI 9%CI 9% CI 9%CI.5 5 5 2. oupu T 9%CI 9%CI 9% CI 9%CI 5 5 2 inflaion T 9%CI 9%CI 9% CI 9%CI 5 5 2 inflaion NT.5.5 9%CI 9%CI 9% CI 9%CI 5 5 2 inernal erms of rade 9%CI 9%CI 9% CI 9%CI 5 5 2.5..5.5.4.3 real wage.2.. 9%CI 9%CI 9% CI 9%CI 5 5 2.5.5.6.4.2.2 consumpion 9%CI 9%CI 9% CI 9%CI 5 5 2 erms of rade 9%CI 9%CI 9% CI 9%CI 5 5 2 38 N a i o n a l B a n k o f P o l a n d

Adjusmen dynamics under EMU: IRF analysis σ 5 WORKING PAPER No. 86 39

Adjusmen dynamics under EMU: IRF analysis 5 4 3 2.5.5.5 oupu T 5 5 2.5.5 oupu NT 5 5 2..8.6.4.2.2 2 3 9%CI 9%CI 9% CI 9%CI inflaion T 9%CI 9%CI 9% CI 5 5 9%CI 2 inernal erms of rade 9%CI 9%CI 9% CI 9%CI...2.3 inflaion NT 5 5 2 2 3 5 5 2.5.5.5 2 9%CI 9%CI 9% CI 9%CI 9%CI 9%CI 9% CI 9%CI real wage 9%CI 9%CI 9% CI 9%CI consumpion 5 5 2 9%CI 9%CI 9% CI 9%CI 5 5 2 erms of rade 9%CI 9%CI 9% CI 9%CI 5 5 2 4 N a i o n a l B a n k o f P o l a n d

Adjusmen dynamics under EMU: IRF analysis 5.5.5.2...2.3.2.8.6.4.2.2 oupu T 9%CI 9%CI 9% CI 9%CI 5 5 2 inflaion T 9%CI 9%CI 9% CI 9%CI 5 5 2 inernal erms of rade 5 5 2.5.5 oupu NT 9%CI 9%CI 9% CI 9%CI 5 5 2.5.5.5 5 5 2 2 9%CI 9%CI 9% CI 9%CI inflaion NT 9%CI 9%CI 9% CI 9%CI real wage 9%CI 9%CI 9% CI 9%CI 5 5 2.5.5.5 2.2.5..5.5..5.2.2.4.6.8 consumpion 9%CI 9%CI 9% CI 5 5 9%CI 2 erms of rade 5 5 2 9%CI 9%CI 9% CI 9%CI WORKING PAPER No. 86 4

Adjusmen dynamics under EMU: IRF analysis 5.2.2.4.6.8.2.5.4.3.2...2. oupu NT 9%CI 9%CI 9% CI 9%CI 5 5 2..2.3.4.5.6 oupu T 9%CI 9%CI 9% CI 9%CI 5 5 2 inflaion T inflaion NT.2.2.4.6.8 9%CI 9%CI 9% CI 9%CI 9%CI 9%CI 9% CI 9%CI 5 5 2 inernal erms of rade 9%CI 9%CI 9% CI 9%CI 5 5 2.8.6.4.2 5 5 2.2.8.6.4 real wage 9%CI 9%CI 9% CI 9%CI 5 5 2.2.2..2.3.4.2.8.6.4.2.2 consumpion 9%CI 9%CI 9% CI 9%CI 5 5 2 erms of rade 9%CI 9%CI 9% CI 9%CI 5 5 2 42 N a i o n a l B a n k o f P o l a n d

MCI-raio and adjusmen o permanen ineres rae shock i i ρ c = h c +h + E +h c + h i +h)σ E π + )+ h ε +h)σ d, E ε d,+ ) i ρ ρ c = h c +h + E +h c + h i +h)σ E π + )+ h [ε +h)σ d, E ε d,+ i] i =.25 6 ρ c =.962 WORKING PAPER No. 86 43

MCI-raio and adjusmen o permanen ineres rae shock 5.% 3.4% 4.3% 8.6% 2.7% 6.3% 6 6 4 2 producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade 6 4 2 producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade 2 2 4 4 5 5 2 25 3 5 5 2 25 3 44 N a i o n a l B a n k o f P o l a n d

6 MCI-raio and adjusmen o permanen ineres rae shock 4 2 producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade 6 4 2 producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade 2 2 4 4 5 5 2 25 3 5 5 2 25 3 6 4 2 producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade 6 4 2 producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade 2 2 4 5 5 2 25 3 4 5 5 2 25 3 6 ρ c ρ c WORKING PAPER No. 86 45

MCI-raio and adjusmen o permanen ineres rae shock 6 46 N a i o n a l B a n k o f P o l a n d

Conclusion 3.4% 5.% 7 WORKING PAPER No. 86 47

References 48 N a i o n a l B a n k o f P o l a n d

References WORKING PAPER No. 86 49

References 5 N a i o n a l B a n k o f P o l a n d

References WORKING PAPER No. 86 5

References 52 N a i o n a l B a n k o f P o l a n d