Artikel
Unit Total Costs: An Alternative Marginal Cost Proxy for Inflation Dynamics
The New Keynesian Phillips Curve (NKPC), driven by unit labor costs has been criticized for failing to match inflation dynamics and for explaining the duration of price contracts. This paper extends recent attempts in the literature to improve the fit of the NKPC, by introducing a fuller marginal cost proxy, 'unit total costs', that is derived from both labor and non-labor unit costs; the latter includes capital-related costs and production taxes. Borrowing costs are examined separately, as in the cost channel literature. Unit total costs are shown to improve the fit of the short-run variation in inflation and strengthen the empirical support for the role of expectations-based inflation persistence. They also imply a duration of fixed nominal contracts that is closer to those suggested by firm-level surveys. The cost channel becomes relatively less important when unit total costs, rather than unit labor costs, are used as a marginal cost proxy.
- Language
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Englisch
- Bibliographic citation
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Journal: Macroeconomic Dynamics ; ISSN: 1469-8056 ; Volume: 20 ; Year: 2016 ; Issue: 7 ; Pages: 1826-1849 ; Cambridge: Cambridge University Press
- Classification
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Wirtschaft
- Subject
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New Keynesian Phillips curve
inflation
price rigidity
marginal cost proxy
production costs
borrowing costs
cost channel
- Event
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Geistige Schöpfung
- (who)
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Bratsiotis, George J.
Robinson, Wayne A.
- Event
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Veröffentlichung
- (who)
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Cambridge University Press
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
- (where)
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Cambridge
- (when)
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2016
- DOI
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doi:10.1017/S1365100515000140
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Bratsiotis, George J.
- Robinson, Wayne A.
- Cambridge University Press
- ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
Time of origin
- 2016
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