Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/39327
Authors: 
Yao, Fang
Year of Publication: 
2010
Series/Report no.: 
SFB 649 discussion paper 2010,030
Abstract: 
Whelan (2007) found that the generalized Calvo-sticky-price model fails to replicate a typical feature of the empirical reduced-form Phillips curve - the positive dependence of inflation on its own lags. In this paper, I show hat it is the 4-period-Taylor-contract hazard function he chose that gives rise to this result. In contrast, an empirically-based aggregate price reset hazard function can generate simulated data that are consistent with inflation gap persistence found in US CPI data. I conclude that a non-constant price reset hazard plays a crucial role for generating realistic inflation dynamics.
Subjects: 
Inflation gap persistence
Trend inflation
New Keynesian Phillips curve
Hazard function
JEL: 
E12
E31
Document Type: 
Working Paper

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