Economics at your fingertips  

Intrinsic persistence of wage inflation in New Keynesian models of the business cycles

Giovanni Di Bartolomeo () and Marco Di Pietro ()

No 55, Dynare Working Papers from CEPREMAP

Abstract: Our paper derives and estimates a New Keynesian wage Phillips curve that accounts for intrinsic inertia. Our approach considers a wage-setting model featuring an upward-sloping hazard function, that is based on the notion that the probability of resetting a wage depends on the time elapsed since the last reset. According to our specification, we obtain a wage Phillips curve that also includes backward-looking terms, which account for persistence. We test the slope of the hazard function using GMM estimation. Then, placing our equation in a small-scale New Keynesian model, we investigate its dynamic properties using Bayesian estimation. Model comparison shows that our model outperforms commonly used alternative methods to introduce persistence.

Keywords: duration-dependent wage adjustments; intrinsic inflation persistence; DSGE models; hybrid Phillips curves; model comparison (search for similar items in EconPapers)
JEL-codes: C11 E24 E31 E32 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2020-02
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Main text (application/pdf)

Related works:
Journal Article: Intrinsic Persistence of Wage Inflation in New Keynesian Models of the Business Cycles (2017) Downloads
Working Paper: Intrinsic persistence of wage inflation in New Keynesian models of the business cycles (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Dynare Working Papers from CEPREMAP Contact information at EDIRC.
Bibliographic data for series maintained by Sébastien Villemot ().

Page updated 2021-10-13
Handle: RePEc:cpm:dynare:055