Sheedy, Kevin D. (2007) Inflation persistence when price stickiness differs between industries. 838. Centre for Economic Performance. London School of Economics and Political Science, London, UK.
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Abstract
There is much evidence that price-adjustment frequencies vary widely across industries. This paper shows that inflation persistence is lower with heterogeneity in price stickiness than without it, taking as given the degree of persistence in variables affecting inflation. Differences in the frequency of price adjustment mean that the pool of firms which responds to any macroeconomic shock is unrepresentative, containing a disproportionately large number of firms from industries with more flexible prices. Consequently, this group of firms is more likely to reverse any initial price change after a shock has dissipated, making inflation persistence much harder to explain.
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | http://cep.lse.ac.uk/ |
| Additional Information: | © 2007 K. D. Sheedy |
| Uncontrolled Keywords: | Inflation persistence; heterogeneity; price stickiness; New Keynesian Phillips Curve |
| Library of Congress subject classification: | H Social Sciences > HB Economic Theory |
| Journal of Economic Literature Classification System: | E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles |
| Sets: | Collections > Economists Online Research centres and groups > Centre for Economic Performance (CEP) Departments > Economics |
| Rights: | http://www.lse.ac.uk/library/rights/LSERO.htm |
| Identification Number: | 838 |
| URL: | http://eprints.lse.ac.uk/3738/ |
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