Can the New Keynesian Phillips Curve Explain Inflation Gap Persistence?
No SFB649DP2010-030, SFB 649 Discussion Papers from Humboldt University, Collaborative Research Center 649
Whelan (2007) found that the generalized Calvo-sticky-price model fails to replicate a typical feature of the empirical reduced-form Phillips curve - the positive dependence of inflation on its own lags. In this paper, I show that it is the 4-period-Taylor-contract hazard function he chose that gives rise to this result. In contrast, an empirically-based aggregate price reset hazard function can generate simulated data that are consistent with inflation gap persistence found in US CPI data. I conclude that a non-constant price reset hazard plays a crucial role for generating realistic inflation dynamics.
Keywords: Inflation gap persistence; Trend inflation; New Keynesian Phillips curve; Hazard function (search for similar items in EconPapers)
JEL-codes: E12 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:hum:wpaper:sfb649dp2010-030
Access Statistics for this paper
More papers in SFB 649 Discussion Papers from Humboldt University, Collaborative Research Center 649 Contact information at EDIRC.
Series data maintained by RDC-Team ().