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

Ivan Petrella and Emiliano Santoro

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

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, Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics?, American Economic Review, vol. 96(1), pp. 303-320 ]. 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.

Date: 2011-12
New Economics Papers: this item is included in nep-cba and nep-mac
References: Add references at CitEc
Citations:

Downloads: (external link)
https://lirias.kuleuven.be/bitstream/123456789/333651/1/DPS1138.pdf

Related works:
Journal Article: Inflation dynamics and real marginal costs: New evidence from U.S. manufacturing industries (2012)
Working Paper: Inflation Dynamics and Real Marginal Costs: New Evidence from U.S. Manufacturing Industries (2012)
Working Paper: Inflation Dynamics and Real Marginal Costs: New Evidence from U.S. Manufacturing Industries (2011)
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: https://EconPapers.repec.org/RePEc:ete:ceswps:ces11.38

Access Statistics for this paper

More papers in Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven
Bibliographic data for series maintained by library EBIB ().