Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152851
Authors: 
Whelan, Karl
Year of Publication: 
2004
Series/Report no.: 
ECB Working Paper 417
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 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.
Subjects: 
Inflation persistence
staggered contracts
JEL: 
E31
Document Type: 
Working Paper

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