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Can we explain inflation persistence in a way that is consistent with the microevidence on nominal rigidity?

Dixon, Huw David and Kara, Engin 2010. Can we explain inflation persistence in a way that is consistent with the microevidence on nominal rigidity? Journal of Money, Credit and Banking 42 (1) , pp. 151-170. 10.1111/j.1538-4616.2009.00282.x

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Abstract

This paper adopts the impulse-response methodology to understand inflation persistence. It has often been argued that existing models of pricing fail to explain the persistence that we observe. We adopt a common general framework that allows for an explicit modeling of the distribution of contract lengths and for different types of price setting. We also evaluate how far the theories are consistent with recent evidence on price and wage rigidity. We find that allowing for a distribution of durations can take us a long way to solving the puzzle of inflation persistence, but not all the way yet.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Uncontrolled Keywords: DSGE models; inflation; persistence; price-setting
Publisher: Wiley
ISSN: 0022-2879
Last Modified: 04 Jun 2017 03:20
URI: http://orca.cf.ac.uk/id/eprint/19946

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