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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.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jeffrey C. Fuhrer & George R. Moore, 1993. "Inflation persistence," Finance and Economics Discussion Series 93-17, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:93-17
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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General

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