Input-Output Structure and New Keynesian Phillips Curve
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 99 (2009)
Issue (Month): 2 (April-June)
|Contact details of provider:|| |