Elusive Persistence: Wage and Price Rigidities, the New Keynesian Phillips Curve and Inflation Dynamics

32 Pages Posted: 24 Jul 2011

See all articles by Christopher Tsoukis

Christopher Tsoukis

London Metropolitan University - Department of Economics, Finance and International Business (EFIB)

George Kapetanios

King's College, London

Joseph Pearlman

London Metropolitan University - Department of Economics, Finance and International Business (EFIB)

Date Written: September 2011

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.

Keywords: Inflation equations, Persistence, Price stickiness

Suggested Citation

Tsoukis, Chris and Kapetanios, George and Pearlman, Joseph G., Elusive Persistence: Wage and Price Rigidities, the New Keynesian Phillips Curve and Inflation Dynamics (September 2011). Journal of Economic Surveys, Vol. 25, Issue 4, pp. 737-768, 2011, Available at SSRN: https://ssrn.com/abstract=1892590 or http://dx.doi.org/10.1111/j.1467-6419.2009.00622.x

Chris Tsoukis (Contact Author)

London Metropolitan University - Department of Economics, Finance and International Business (EFIB) ( email )

Economics Subject Group, LMBS
London EC2M 6SQ, EC2M 6SQ
United Kingdom

George Kapetanios

King's College, London ( email )

30 Aldwych
London, WC2B 4BG
United Kingdom
+44 20 78484951 (Phone)

Joseph G. Pearlman

London Metropolitan University - Department of Economics, Finance and International Business (EFIB) ( email )

Economics Subject Group, LMBS
London EC2M 6SQ, EC2M 6SQ
United Kingdom

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