Inflation Dynamics: A Structural Econometric Analysis /
Gali, Jordi.
Inflation Dynamics: A Structural Econometric Analysis / Jordi Gali, Mark Gertler. - Cambridge, Mass. National Bureau of Economic Research 2000. - 1 online resource: illustrations (black and white); - NBER working paper series no. w7551 . - Working Paper Series (National Bureau of Economic Research) no. w7551. .
February 2000.
We develop and estimate a structural model of inflation that allows for a fraction of firms that use a backward looking rule to set prices. The model nests the purely forward looking New Keynesian Phillips curve as a particular case. We use measures of arginal cost as the relevant determinant of inflation, as the theory suggests, instead of an ad-hoc output gap. Real marginal costs are a significant and quantitatively important determinant of inflation. Backward looking price setting, while statistically significant, is not quantitatively important. Thus, we conclude that the New Keynesian Phillips curve provides a good first approximation to the dynamics of inflation.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.
Inflation Dynamics: A Structural Econometric Analysis / Jordi Gali, Mark Gertler. - Cambridge, Mass. National Bureau of Economic Research 2000. - 1 online resource: illustrations (black and white); - NBER working paper series no. w7551 . - Working Paper Series (National Bureau of Economic Research) no. w7551. .
February 2000.
We develop and estimate a structural model of inflation that allows for a fraction of firms that use a backward looking rule to set prices. The model nests the purely forward looking New Keynesian Phillips curve as a particular case. We use measures of arginal cost as the relevant determinant of inflation, as the theory suggests, instead of an ad-hoc output gap. Real marginal costs are a significant and quantitatively important determinant of inflation. Backward looking price setting, while statistically significant, is not quantitatively important. Thus, we conclude that the New Keynesian Phillips curve provides a good first approximation to the dynamics of inflation.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.