Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/74158 
Authors: 
Year of Publication: 
2005
Series/Report no.: 
Nota di Lavoro No. 12.2005
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
Abstract: 
The purpose of this paper is to test the general validity of the NKPC previsions for the Italian manufacturing industries. In particular we are interested in estimating the extent to which the degree of nominal inertia and the fraction of backward-looking price-setters differ from industry to industry. We attempt to address this issue by testing three different model specifications: a pure forward-looking model versus a hybrid model where an income labour share marginal cost measure is considered, and a modified hybrid model specification where marginal costs are corrected to include intermediate inputs. Our results show that the backward-looking component is statistically significant and quantitatively large for all industries. Moreover, this estimate does not depend on the model’s specification. Conversely, the parameter measuring the extent of price rigidity is sensitive to the definition of firms’ cost. Interpreting the overall results, we conclude that price-setting behaviour is not totally homogeneous among Italian firms.
Subjects: 
Phillips curve
Inflation
Unit labour cost
JEL: 
E3
Document Type: 
Working Paper

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