Can we explain inflation persistence in a way that is consistent with the micro-evidence on nominal rigidity?

Huw Dixon and Engin Kara

No E2008/22, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

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. We also evaluate how far the theories are consistent with recent evidence on price and wage rigidity. We find that allowing for a distribution of durations can take us a long way to solving the puzzle of inflation persistence, but not all the way yet.

Keywords: DSGE models; inflation; persistence; price-setting (search for similar items in EconPapers)
JEL-codes: E17 E3 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2008-09
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published in Journal of Money, Credit and Banking , Volume 42, Number 1, February 2010 , pp. 151-170.

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Related works:
Journal Article: Can We Explain Inflation Persistence in a Way that Is Consistent with the Microevidence on Nominal Rigidity? (2010)
Journal Article: Can We Explain Inflation Persistence in a Way that Is Consistent with the Microevidence on Nominal Rigidity? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2008/22

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