Staggered price contracts and inflation persistence : some general results
|Title:||Staggered price contracts and inflation persistence : some general results||Authors:||Whelan, Karl||Permanent link:||http://hdl.handle.net/10197/236||Date:||Oct-2004||Abstract:||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 the 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.||Type of material:||Technical Report||Publisher:||Central Bank of Ireland||Copyright (published version):||2004 Copyright Central Bank of Ireland||Subject LCSH:||Inflation (Finance)--Mathematical models||Other versions:||http://www.centralbank.ie/data/TechPaperFiles/8RT04.PDF||Language:||en||Status of Item:||Not peer reviewed||metadata.dc.date.available:||2008-06-12T14:26:55Z|
|Appears in Collections:||Economics Research Collection|
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