Sheedy, Kevin D. (2007) Intrinsic inflation persistence. 837. Centre for Economic Performance, London School of Economics and Political Science, London, UK.
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Abstract
It is often argued that the New Keynesian Phillips curve is at odds with the data because it cannot explain inflation persistence — the difficulty of returning inflation immediately to target after a shock without any loss of output. This paper explains how a model where newer prices are stickier than older prices is consistent with this phenomenon, even though it introduces no deviation from optimizing, forwards-looking price setting. The probability of adjusting new and old prices is estimated using a novel method that draws only on macroeconomic data, and the findings strongly support the premise of the model.
| 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, hazard function, time-dependent pricing, 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: | 837 |
| URL: | http://eprints.lse.ac.uk/3739/ |
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