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A New Phillips curve for Spain

In: Empirical studies of structural changes and inflation

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  • Jordi Galí

    (Bank of Spain)

  • J David López-Salido

    (Bank of Spain)

Abstract

In this paper we provide evidence on the fit of the New Phillips Curve (NPC) for Spain over the most recent disinflationary period (1980-1998). Some of the findings can be summarized as follows: (a) the NPC fits the data well; (b) yet, the backward looking component of inflation is important; (c) the degree of price stickiness implied by the estimates is plausible; (d) the use of independent information about prices on imported intermediate goods (which is influenced by the exchange rate) affects the measure of the firm's marginal costs and so inflation dynamics; and finally, (e) labor market frictions, as manifested in the behavior of the wage markup, appear to have also played a key role in shaping the behavior of marginal costs.

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This chapter was published in:

  • Bank for International Settlements, 2001. "Empirical studies of structural changes and inflation," BIS Papers, Bank for International Settlements, Bank for International Settlements, number 03, 8.
    This item is provided by Bank for International Settlements in its series BIS Papers chapters with number 03-07.

    Handle: RePEc:bis:bisbpc:03-07

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    1. Bentolila, Samuel & Saint-Paul, Gilles, 1992. "A Model of Labour Demand with Linear Adjustment Costs," CEPR Discussion Papers, C.E.P.R. Discussion Papers 690, C.E.P.R. Discussion Papers.
    2. Arellano, Manuel & Bentolila, Samuel & Bover, Olympia, 2001. "The Distribution of Earnings in Spain During the 1980s: The Effects of Skill, Unemployment and Union Power," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2770, C.E.P.R. Discussion Papers.
    3. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 546, Board of Governors of the Federal Reserve System (U.S.).
    4. Georges Siotis, 2000. "Market Power, Total Factor Productivity Growth, and Structural Change. An Illustration for Spain, 1983-1996," Banco de Espa�a Working Papers 0001, Banco de Espa�a.
    5. Laurence Ball, 1993. "What Determines the Sacrifice Ratio?," NBER Working Papers 4306, National Bureau of Economic Research, Inc.
    6. Cara S. Lown & Robert W. Rich, 1997. "Is there an inflation puzzle?," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Dec, pages 51-77.
    7. Dolado, J J & Malo de Molina, J L & Zabalza, A, 1986. "Spanish Industrial Unemployment: Some Explanatory Factors," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 53(210(S)), pages S313-34, Supplemen.
    8. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, Elsevier, vol. 37(2-3), pages 345-370, April.
    9. Michael Woodford, 1996. "Control of the Public Debt: A Requirement for Price Stability?," NBER Working Papers 5684, National Bureau of Economic Research, Inc.
    10. Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing And The General Equilibrium Dynamics Of Money And Output," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(2), pages 655-690, May.
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    Cited by:
    1. Fabio Rumler, 2005. "Estimates of the Open Economy New Keynesian Phillips Curve for Euro Area Countries," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 102, Oesterreichische Nationalbank (Austrian Central Bank).
    2. Bentolila, Samuel & Dolado, Juan J. & Jimeno, Juan F., 2008. "Does immigration affect the Phillips curve? Some evidence for Spain," European Economic Review, Elsevier, Elsevier, vol. 52(8), pages 1398-1423, November.
    3. Campbell Leith & Jim Malley, 2002. "Estimated Open Economy New Keynesian Phillips Curves for the G7," Working Papers, Business School - Economics, University of Glasgow 2002_8, Business School - Economics, University of Glasgow.
    4. Hernán Rincón & Edgar Caicedo & Norberto Rodríguez, 2005. "Exchange Rate Pass-Through Effects : A Disaggregate Analysis Of Colombian Imports Of Manufactured Goods," BORRADORES DE ECONOMIA 002682, BANCO DE LA REPÚBLICA.
    5. repec:onb:oenbwp:y::i:102:b:1 is not listed on IDEAS
    6. Nicoleta CIURILA & Bogdan MURARASU, 2008. "Inflation Dynamics in Romania – a New Keynesian Perspective," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, University of Craiova, Faculty of Economics and Business Administration, vol. 1(36), pages 155-160, May.
    7. Aurelijus Dabušinskas & Dmitry Kulikov, 2007. "New Keynesian Phillips curve for Estonia, Latvia and Lithuania," Bank of Estonia Working Papers, Bank of Estonia 2007-07, Bank of Estonia, revised 26 Aug 2007.
    8. Janko Gorter, 2005. "Subjective Expectations and New Keynesian Phillips Curves in Europe," DNB Working Papers, Netherlands Central Bank, Research Department 049, Netherlands Central Bank, Research Department.
    9. Joerg Scheibe & David Vines, 2005. "A Phillips Curve For China," CAMA Working Papers 2005-02, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    10. Júlia Lendvai, 2005. "Hungarian Inflation Dynamics," MNB Occasional Papers, Magyar Nemzeti Bank (the central bank of Hungary) 2005/46, Magyar Nemzeti Bank (the central bank of Hungary).
    11. Ieva Rubene & Paolo Guarda, 2004. "The new Keynesian Phillips curve: empirical results for Luxembourg," BCL working papers, Central Bank of Luxembourg 11, Central Bank of Luxembourg.

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