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Understanding inflation persistence: a comparison of different models

Huw Dixon and Engin Kara

No 672, Working Paper Series from European Central Bank

Abstract: This paper adopts the Impulse-Response methodology to understand inflation persistence. It has often been argued that existing models of pricing fail to explain the persistence that we observe. We adopt a common general framework which allows for an explicit modelling of the distribution of contract lengths and for different types of price setting. In particular, we find that allowing for a distribution of contract lengths can yield a more plausible explanation of inflation persistence than indexation. JEL Classification: E17, E3

Keywords: DGE models; inflation; persistence; price-setting. (search for similar items in EconPapers)
Date: 2006-09
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Citations: View citations in EconPapers (10)

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