Nonlinearity of the inflation-output trade-off and time-varying price rigidity

Antonia Lopez Villavicencio () and Valérie Mignon ()

Working Papers from HAL

Abstract: 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)
Date: 2013
Note: View the original document on HAL open archive server: https://hal.science/hal-04141225
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Related works:
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)
Working Paper: Nonlinearity of the inflation-output trade-off and time-varying price rigidity (2013)
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