Sheedy, Kevin D. 
ORCID: 0000-0002-0247-6323
(2010)
Intrinsic inflation persistence.
Journal of Monetary Economics, 57 (8).
pp. 1049-1061.
ISSN 0304-3932
Abstract
Empirical evidence suggests that inflation determination is not purely forward-looking, but models of price setting have struggled to rationalize this finding without directly assuming backward-looking pricing rules for firms. This paper shows that intrinsic inflation persistence can be explained with no deviation from optimizing, forward-looking behaviour if prices that have remained fixed for longer are more likely to be changed than those set recently. A relationship between the probability of price adjustment and the duration of a price spell is shown to imply a simple “hybrid” Phillips curve including lagged and expected inflation, which is estimated using macroeconomic data.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.sciencedirect.com/science/journal/03043... |
| Additional Information: | © 2010 Elsevier |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HB Economic Theory |
| Date Deposited: | 13 Apr 2011 15:47 |
| Last Modified: | 01 Apr 2024 08:18 |
| URI: | http://eprints.lse.ac.uk/id/eprint/35150 |
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