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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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  12. Yetman, James, 2003. "Fixed prices versus predetermined prices and the equilibrium probability of price adjustment," Economics Letters, Elsevier, vol. 80(3), pages 421-427, September.
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  25. Michael B. Devereux & James Yetman, 2001. "Predetermined Prices and the Persistent Effects of Money on Output," Staff Working Papers 01-13, Bank of Canada.
  26. Ignazio Angelloni & Luc Aucremanne & Michael Ehrmann & Jordi Galí & Andrew Levin & Frank Smets, 2005. "New evidence on inflation persistence and price stickiness in the Euro area: Implications for macro modelling," Economics Working Papers 910, Department of Economics and Business, Universitat Pompeu Fabra.
  27. Filippo Altissimo & Laurent Bilke & Andrew Levin & Thomas Mathä & Benoit Mojon, 2006. "Sectoral and Aggregate Inflation Dynamics in the Euro Area," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 585-593, 04-05.
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