Staggered contracts and inflation persistence : some general results

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Title: Staggered contracts and inflation persistence : some general results
Authors: Whelan, Karl
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Date: Feb-2007
Online since: 2008-06-05T14:24:23Z
Abstract: Despite their popularity as theoretical tools for illustrating the effects of nominal rigidities, some have questioned whether models based on staggered price contracts with rational expectations can match the persistence of the empirical inflation process. This article presents some general results about this class of 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.
Type of material: Journal Article
Publisher: Blackwell
Journal: International Economic Review
Volume: 48
Issue: 1
Start page: 111
End page: 145
Subject LCSH: Rational expectations (Economic theory)
Inflation (Finance)--Mathematical models
DOI: 10.1111/j.1468-2354.2007.00419.x
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Language: en
Status of Item: Peer reviewed
Appears in Collections:Economics Research Collection

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