ELUSIVE PERSISTENCE: WAGE AND PRICE RIGIDITIES,THE NEW KEYNESIAN PHILLIPS CURVE AND INFLATION DYNAMICS |
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| Authors: | Christopher Tsoukis George Kapetanios Joseph Pearlman |
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| Affiliation: | 1. London Metropolitan University;2. Queen Mary College, University of London |
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| Abstract: | Abstract 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 exceptions seem to be when indexation is allowed in price setting or when price stickiness is combined with wage rigidity and staggering. |
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| Keywords: | Inflation equations Persistence Price stickiness |
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