Staggered price contracts and inflation persistence: some general results

Arbeitspapier

Despite their popularity as theoretical tools for illustrating the effects of nominal rigidities, some have questioned whether models based on Taylor-style staggered contracts can match the persistence of the empirical inflation process. This paper presents some general theoretical results about Taylor-style models. It is shown that these models do not have a problem matching high autocorrelations for inflation. However, they fail to explain a key feature of reduced-form Phillips-curve regressions: The positive dependence of inflation on its own lags. It is shown that staggered price contracting models instead predict that the coefficients on these lag terms should be negative.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 417

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation
• Subject: Inflation persistence ; staggered contracts

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Whelan, Karl
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/152851
• Last update: 10.03.2025, 11:45 AM CET