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How does the Phillips curve slope vary with repricing rates?

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  • De Veirman, Emmanuel

Abstract

In sticky price models, the slope of the Phillips curve depends positively on the probability of price adjustment. I use a series for the empirical frequency of price adjustment to test this implication. I find some evidence that the Phillips curve slope depends positively on the repricing rate. My results support the implication from New Keynesian theory with Calvo pricing that the Phillips curve slope is a convex function of the frequency of price adjustment. However, at all observed values of the frequency of price adjustment, the empirical Phillips curve relation is much flatter than the New Keynesian Phillips Curve at standard parameter values would imply. JEL Classification: C22, E31

Suggested Citation

  • De Veirman, Emmanuel, 2023. "How does the Phillips curve slope vary with repricing rates?," Working Paper Series 2804, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20232804
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    1. Laurence Ball & Sandeep Mazumder, 2019. "A Phillips Curve with Anchored Expectations and Short‐Term Unemployment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(1), pages 111-137, February.
    2. Emmanuel De Veirman, 2022. "How Does the Phillips Curve Slope Vary with Repricing Rates?," Working Papers 735, DNB.
    3. Laurence Ball & Sandeep Mazumder, 2011. "Inflation Dynamics and the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 337-405.
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    13. Tatsushi Okuda & Tomohiro Tsuruga & Francesco Zanetti, 2021. "Imperfect information, heterogeneous demand shocks, and inflation dynamics," CAMA Working Papers 2021-29, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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    15. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
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    Cited by:

    1. Emmanuel De Veirman, 2022. "How Does the Phillips Curve Slope Vary with Repricing Rates?," Working Papers 735, DNB.
    2. Christian Garciga & Randal J. Verbrugge & Saeed Zaman, 2024. "The Effect of Component Disaggregation on Measures of the Median and Trimmed-Mean CPI," Working Papers 24-02, Federal Reserve Bank of Cleveland.
    3. Dedola, Luca & Gautier, Erwan & Nakov, Anton & Santoro, Sergio & De Veirman, Emmanuel & Henkel, Lukas & Fagandini, Bruno, 2023. "Some implications of micro price-setting evidence for inflation dynamics and monetary transmission," Occasional Paper Series 321, European Central Bank.

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    More about this item

    Keywords

    inflation; Phillips curve; price setting;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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