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The Elusive Persistence: Wage and Price Rigidities, the Phillips Curve, and Inflation Dynamics

  • Chris Tsoukis

    ()

    (London Metropolitan University)

  • George Kapetanios

    ()

    (Queen Mary, University of London)

  • Joseph Pearlman

    (London Metropolitan University)

We review the main New Keynesian inflation equations that have arisen as a result of aggregation from individual firms' price rigidities. We find that, on the whole, they cannot account for inflation persistence, a key feature of the empirical dynamics of inflation, and with important policy implications. The only exception seems to be when price stickiness is combined with wage rigidity and staggering.

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File URL: http://www.econ.qmul.ac.uk/papers/doc/wp619.pdf
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Paper provided by Queen Mary University of London, School of Economics and Finance in its series Working Papers with number 619.

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Date of creation: Oct 2007
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Handle: RePEc:qmw:qmwecw:wp619
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  13. Andrew Levin & Christopher J. Erceg & Dale W. Henderson, 1999. "Optimal Monetary Policy with Staggered Wage and Price Contracts," Computing in Economics and Finance 1999 1151, Society for Computational Economics.
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