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Title:Can we explain inflation persistence in a way that is consistent with the micro-evidence on nominal rigidity? PDF Logo
Authors:Dixon, Huw
Kara, Engin
Issue Date:2008
Series/Report no.:Cardiff Economics Working Papers E2008/22
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 which allows for an explicit modelling 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.
Subjects:DSGE models
inflation
persistence
price-setting
JEL:E17
E3
Document Type:Working Paper
Appears in Collections:Cardiff Economics Working Papers, Cardiff Business School, Cardiff University

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