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Inflation dynamics and real marginal costs: New evidence from U.S. manufacturing industries

Ivan Petrella and Emiliano Santoro

Journal of Economic Dynamics and Control, 2012, vol. 36, issue 5, 779-794

Abstract: This paper deals with the analysis of price-setting in U.S. manufacturing industries. Recent studies have heavily criticized the ability of the New Keynesian Phillips curve (NKPC) to fit aggregate inflation (see, e.g., Rudd and Whelan, 2006). We challenge this evidence, showing that forward-looking behavior as implied by the New Keynesian model of price-setting is widely supported at the sectoral level. In fact, current and expected future values of the income share of intermediate goods emerge as an effective driver of inflation dynamics. Unlike alternative proxies for the forcing variable, the cost of intermediate goods presents dynamic properties in line with the predictions of the New Keynesian theory.

Keywords: New Keynesian Phillips curve; Aggregation; Sectoral data; Intermediate goods (search for similar items in EconPapers)
JEL-codes: E31 L60 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Inflation Dynamics and Real Marginal Costs: New Evidence from U.S. Manufacturing Industries (2012) Downloads
Working Paper: Inflation dynamics and real marginal costs: new evidence from U.S. manufacturing industries (2011) Downloads
Working Paper: Inflation Dynamics and Real Marginal Costs: New Evidence from U.S. Manufacturing Industries (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:36:y:2012:i:5:p:779-794

DOI: 10.1016/j.jedc.2012.01.009

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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