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 ()
No 2013-1, EconomiX Working Papers from University of Paris Nanterre, EconomiX
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: E31 C22 (search for similar items in EconPapers)
Pages: 17 pages
New Economics Papers: this item is included in nep-mac
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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:drm:wpaper:2013-1
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