Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153240
Authors: 
McAdam, Peter
Willman, Alpo
Year of Publication: 
2007
Series/Report no.: 
ECB Working Paper 806
Abstract: 
We implement a tractable state-dependent Calvo price-setting signal dependent on inflation and aggregate competitiveness. This allows us to derive a New Keynesian Phillips Curve (NKPC) expressed in terms of the actual levels of variables - rather than in-deviation from “steady state” form - and thus a specification which is not regime-dependent. A consequence of our approach is that ex-ante all firms face the same optimization problem. This state-dependent NKPC nests the conventional hybrid NKPC form as a special case. Finally, we demonstrate the uefulness of our approach by, first, analyzing the persistence and variability of inflation shocks under different inflation regimes and then comparing our state-dependent and timedependent NKPCs on US data.
Subjects: 
Calvo Price Staggering
Firm-Level Optimization
New Keynesian Phillips Curves
Regime Dependency+
State-Dependency
JEL: 
E31
E32
Document Type: 
Working Paper

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