Paper #341

Títol:

Inflation dynamics: A structural econometric analysis

Autors:

Jordi Galí i Mark Gertler

Data:

Agost 1998

Resum:

We develop and estimate a structural model of inflation that allows for a fraction of firms that use a backward looking rule to set prices. The model nests the purely forward looking New Keynesian Phillips curve as a particular case. We use measures of marginal costs as the relevant determinant of inflation, as the theory suggests, instead of an ad-hoc output gap. Real marginal costs are a significant and quantitatively important determinant of inflation. Backward looking price setting, while statistically significant, is not quantitatively important. Thus, we conclude that the New Keynesian Phillips curve provides a good first approximation to the dynamics of inflation.

Paraules clau:

New Keynesian models, Phillips curve, sticky prices, inflation persistence

Codis JEL:

E32

Àrea de Recerca:

Macroeconomia i Economia Internacional

Publicat a:

Journal of Monetary Economics, vol. 44, nº 2, 195-222, 1999

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