Arbeitspapier
Inflation persistence revisited
It is commonly asserted that inflation is a jump variable in the New Keynesian Phillips curve, and thus wage-price inertia does not imply inflation inertia. We show that this "inflation flexibility proposition" is highly misleading, relying on the assumption that real variables are exogenous. In a general equilibrium setting (in which real variables not only affect inflation, but are also influenced by it) the phenomenon of inflation inertia re-emerges. Under plausible parameter values, high degrees of inflation persistence (prolonged after-effects of inflation in response to temporary money growth shocks) and under-responsiveness (prolonged effects in response to permanent shocks) can arise in the context of standard wage-price staggering models.
- Sprache
-
Englisch
- Erschienen in
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Series: Working Paper ; No. 518
Price Level; Inflation; Deflation
Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
Business Fluctuations; Cycles
Wage-price staggering
New Keynesian Phillips curve
Nominal inertia
Monetary policy
Forward-looking expectations
Inflation
Ungleichgewichtstheorie
Phillips-Kurve
Theorie
Snower, Dennis J.
- Handle
- Letzte Aktualisierung
-
20.09.2024, 08:24 MESZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Karanassou, Marika
- Snower, Dennis J.
- Queen Mary University of London, Department of Economics
Entstanden
- 2004