Nonlinearity of the inflation-output trade-off and time-varying price rigidity
Antonia López-Villavicencio and
Valérie Mignon ()
Authors registered in the RePEc Author Service: Antonia López Villavicencio ()
Working Papers from CEPII research center
Relying on the backward-looking Phillips curve; we estimate the level of inflation that erodes price rigidity and investigate its time constancy. To this end; we employ smooth transition regression models with rolling regressions to account for varying threshold inflation levels. Studying six advanced countries over the 1970-2012 period; our results show that both the slope of the Phillips curve and the threshold; trend inflation that erodes price rigidity are time varying. These characteristics could not be captured by a static linear or nonlinear model; illustrating the rich flexibility embedded in our proposed model.
Keywords: Phillips curve; inflation; price rigidity; nonlinearity; menu costs (search for similar items in EconPapers)
JEL-codes: C22 E31 (search for similar items in EconPapers)
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Working Paper: Nonlinearity of the inflation-output trade-off and time-varying price rigidity (2014)
Working Paper: Nonlinearity of the inflation-output trade-off and time-varying price rigidity (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2013-02
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