Partial indexation and inflation dynamics: what do the data say?
New evidence is provided on the fit of the hybrid Phillips curve based on indexation of prices to lagged inflation and trend inflation for the Euro area and the USA over the period 1970-2002. The GMM-West estimates suggest that (i) a full indexation scheme is not data consistent whereas a partial indexation scheme allows a good fit and (ii) forgetting trend inflation induces overestimating by approximately 3-4% of the probability to not change the price, for reasonable values of trend inflation.
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Volume (Year): 11 (2004)
Issue (Month): 13 ()
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