IDEAS home Printed from https://ideas.repec.org/a/fip/fedfpr/y1993imarx5.html
   My bibliography  Save this article

Inflation persistence

Author

Listed:
  • Jeffrey C. Fuhrer
  • George R. Moore

Abstract

This paper demonstrates that the behavior of the conventional Phelps-Taylor model of overlapping wage contracts stands in stark contrast with important features of U. S. macro data for inflation and output. In particular, the Phelps-Taylor specification implies far too little inflation persistence. We present a new contracting model, in which agents are concerned with relative real wages, that is data-consistent. In a specification that nests both models, we resoundingly reject the conventional contracting model, but cannot reject the new contracting model.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jeffrey C. Fuhrer & George R. Moore, 1993. "Inflation persistence," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  • Handle: RePEc:fip:fedfpr:y:1993:i:mar:x:5
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    2. Robert J. Gordon, 1985. "Understanding Inflation in the 1980s," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(1), pages 263-302.
    3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    4. Frederick R. Macaulay, 1938. "Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1856," NBER Books, National Bureau of Economic Research, Inc, number maca38-1, June.
    5. Ball, Laurence, 1991. "The Genesis of Inflation and the Costs of Disinflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 439-452, August.
    6. Anderson, Gary & Moore, George, 1985. "A linear algebraic procedure for solving linear perfect foresight models," Economics Letters, Elsevier, vol. 17(3), pages 247-252.
    7. Edmund Phelps, 1978. "Disinflation without recession: Adaptive guideposts and monetary policy," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(4), pages 783-809, December.
    8. Buiter, Willem H & Jewitt, Ian, 1981. "Staggered Wage Setting with Real Wage Relativities: Variations on a Theme of Taylor," The Manchester School of Economic & Social Studies, University of Manchester, vol. 49(3), pages 211-228, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Steven Russell, 1993. "Monetary policy experiments in a stochastic overlapping generations model of the term structure," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
    2. Joseph E. Gagnon & Ralph W. Tryon, 1993. "Price and output stability under alternative monetary policy rules," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
    3. Arturo Estrella & Jeffrey C. Fuhrer, 2002. "Dynamic Inconsistencies: Counterfactual Implications of a Class of Rational-Expectations Models," American Economic Review, American Economic Association, vol. 92(4), pages 1013-1028, September.
    4. Coenen, Gunter & Wieland, Volker, 2005. "A small estimated euro area model with rational expectations and nominal rigidities," European Economic Review, Elsevier, vol. 49(5), pages 1081-1104, July.
    5. Mankiw, N Gregory, 2001. "The Inexorable and Mysterious Tradeoff between Inflation and Unemployment," Economic Journal, Royal Economic Society, vol. 111(471), pages 45-61, May.
    6. Coenen, Guenter & Wieland, Volker, 2003. "The Zero-Interest-Rate and the Role of the Exchange Rate for Monetary Policy in Japan," CFS Working Paper Series 2003/09, Center for Financial Studies (CFS).
    7. repec:zbw:cfswop:wp200309 is not listed on IDEAS
    8. repec:zbw:cfswop:wp200308 is not listed on IDEAS
    9. Alagidede, Paul & Coleman, Simeon & Cuestas, Juan Carlos, 2012. "Inflationary shocks and common economic trends: Implications for West African monetary union membership," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 460-475.
    10. Tetlow, Robert J. & von zur Muehlen, Peter, 2001. "Simplicity versus optimality: The choice of monetary policy rules when agents must learn," Journal of Economic Dynamics and Control, Elsevier, vol. 25(1-2), pages 245-279, January.
    11. Roberts, John M., 1997. "Is inflation sticky?," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 173-196, July.
    12. Stephen Murchison & Andrew Rennison & Zhenhua Zhu, 2004. "A Structural Small Open-Economy Model for Canada," Staff Working Papers 04-4, Bank of Canada.
    13. Jeffrey C. Fuhrer & Brian F. Madigan, 1997. "Monetary Policy When Interest Rates Are Bounded At Zero," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 573-585, November.
    14. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050, Elsevier.
    15. Gunter Coenen & Volker Wieland, 2000. "A Simple Estimated Euro Area Model With Rational Expectations And Nominal Rigidities," Computing in Economics and Finance 2000 187, Society for Computational Economics.
    16. Coenen, Gunter & Wieland, Volker, 2003. "The zero-interest-rate bound and the role of the exchange rate for monetary policy in Japan," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1071-1101, July.
    17. Marika Karanassou & Hector Sala, 2012. "Productivity Growth And The Phillips Curve: A Reassessment Of The Us Experience," Bulletin of Economic Research, Wiley Blackwell, vol. 64(3), pages 344-366, July.
    18. Kuikeu, Oscar, 2011. "Arguments contre la zone franc [Against the cfa franc zone]," MPRA Paper 33710, University Library of Munich, Germany.
    19. repec:zbw:cfswop:wp200307 is not listed on IDEAS
    20. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1295-1328.
    21. Sharon Kozicki & Peter A. Tinsley, 2002. "Alternative sources of the lag dynamics of inflation," Research Working Paper RWP 02-12, Federal Reserve Bank of Kansas City.
    22. Richard Mash, 2000. "The Time Inconsistency of Monetary Policy with Inflation Persistence," Economics Series Working Papers 15, University of Oxford, Department of Economics.
    23. Coenen Günter & Orphanides Athanasios & Wieland Volker, 2004. "Price Stability and Monetary Policy Effectiveness when Nominal Interest Rates are Bounded at Zero," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-25, February.

    More about this item

    Keywords

    Vector autoregression; Econometric models; Interest rates; Inflation (Finance);
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedfpr:y:1993:i:mar:x:5. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/frbsfus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/frbsfus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.