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Input-Output Structure and New Keynesian Phillips Curve

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Author Info

  • Alessio Moro

    ()
    (University of Cagliari)

Abstract

I show that an input-output production structure reinforces persistence in the pricing behavior of firms using a Calvo mechanism. In particular, the optimal price today depends upon the expected optimal prices in the infinite future and those set in the infinite past. It follows that the effect of the marginal cost on inflation in the new Keynesian Phillips curve is dampened with respect to the standard model. This helps in explaining the difference between the most recent empirical evidence on price adjustment frequency in the U.S. and structural estimates of the new Keynesian Phillips curve.

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Bibliographic Info

Article provided by SIPI Spa in its journal Rivista di Politica Economica.

Volume (Year): 99 (2009)
Issue (Month): 2 (April-June)
Pages: 145-166

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Handle: RePEc:rpo:ripoec:v:99:y:2009:i:2:p:145-166

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Related research

Keywords: pricing under uncertainty; inflation; Phillips curve;

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Cited by:
  1. Petrella, Ivan & Rossi, Raffaele & Santoro, Emiliano, 2014. "Discretion vs. timeless perspective under model-consistent stabilization objectives," Economics Letters, Elsevier, vol. 122(1), pages 84-88.
  2. Federico di Pace, 2008. "Revisiting the Comovement Puzzle: the Input-Output Structure as an Additional Solution," Birkbeck Working Papers in Economics and Finance 0807, Birkbeck, Department of Economics, Mathematics & Statistics.
  3. Ivan Petrella & Raffaele Rossi & Emiliano Santoro, 2012. "Discretion vs. Timeless Perspective Policy-Making: the Role of Input-Output Interactions," Discussion Papers 12-20, University of Copenhagen. Department of Economics.

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