The Phillips curve under state-dependent pricing
Published
2004
Publisher
Bank of England
Description
"This paper is related to a large recent literature studying the Phillips curve in sticky-price equilibrium models. It differs in allowing for the degree of price stickiness to be determined endogenously. A closed-form solution for short-term inflation is derived from the dynamic stochastic general equilibrium (DSGE) model with state-dependent pricing originally developed by Dotsey, King and Wolman. This generalised Phillips curve encompasses the New Keynesian Phillips curve (NKPC) based on Calvo-type price-setting as a special case. It describes current inflation as a function of lagged inflation, expected future inflation, and current and expected future real marginal costs. The paper demonstrates that inflation dynamics generated by the model for a broad class of time and state-dependent price-setting behaviours are well approximated by the popular hybrid NKPC (with one lag of inflation) in a low-inflation environment. This provides an explanation of why the hybrid NKPC performs well in describing inflation dynamics across industrial countries. It implies, however, that the reduced-form coefficients of the hybrid NKPC may not have a structural interpretation"--Bank of England web site.
Subjects
Die Phillips-Kurve
European inflation dynamics
La curva de Phillips
Intertemporal substitution and the Phillips curve
The nature of the Phillips curve
Estimates of the sticky-information Phillips curve for the United States, Canada, and the United Kingdom
Frequently Asked Questions
Who is the author of The Phillips curve under state-dependent pricing?
The Phillips curve under state-dependent pricing was written by Hasan Bakhshi.
When was The Phillips curve under state-dependent pricing published?
The publication date for this specific edition is 2004. The original work may have been published on a different date.