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A New Phillips Curve for Spain

  • Jordi Galí

    (Centre de Recerca en Economia Inrernacional (CREI))

  • David López-Salido

    (Banco de España)

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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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/01/Fic/dt0109e.pdf
File Function: First version, 2001
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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0109.

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Length: 45 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:bde:wpaper:0109
Contact details of provider: Web page: http://www.bde.es/
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  1. Glenn Rudebusch & Lars E.O. Svensson, 1999. "Policy Rules for Inflation Targeting," NBER Chapters, in: Monetary Policy Rules, pages 203-262 National Bureau of Economic Research, Inc.
  2. Laurence Ball, 1993. "What Determines the Sacrifice Ratio?," NBER Working Papers 4306, National Bureau of Economic Research, Inc.
  3. Bentolila, Samuel & Saint-Paul, Gilles, 1994. "A model of labor demand with linear adjustment costs," Labour Economics, Elsevier, vol. 1(3-4), pages 303-326, September.
  4. Cara S. Lown & Robert W. Rich, 1997. "Is there an inflation puzzle?," Research Paper 9723, Federal Reserve Bank of New York.
  5. 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 2770, C.E.P.R. Discussion Papers.
  6. Michael Woodford, 1996. "Control of the Public Debt: A Requirement for Price Stability?," NBER Working Papers 5684, National Bureau of Economic Research, Inc.
  7. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
  8. 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.
  9. 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, vol. 53(210(S)), pages S313-34, Supplemen.
  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, vol. 114(2), pages 655-690, May.
  11. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 345-370, April.
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