BIROn - Birkbeck Institutional Research Online

    Inflation dynamics and real marginal costs: new evidence from U.S. manufacturing industries

    Petrella, Ivan and Santoro, E. (2012) Inflation dynamics and real marginal costs: new evidence from U.S. manufacturing industries. Working Paper. Birkbeck College, University of London, London, UK.

    [img]
    Preview
    Text
    5957.pdf - Published Version of Record

    Download (562kB) | Preview

    Abstract

    This paper deals with the analysis of price-setting in U.S. manufacturing industries. Recent studies have heavily criticized the ability of the New Keynesian Phillips curve (NKPC) to fit aggregate inflation [see, e.g., Rudd and Whelan, 2006, Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics?, American Economic Review, vol. 96(1), pp. 303-320]. We challenge this evidence, showing that forward-looking behaviour as implied by the New Keynesian model of price-setting is widely supported at the sectoral level. In fact, current and expected future values of the income share of intermediate goods emerge as an effective driver of inflation dynamics. Unlike alternative proxies for the forcing variable, the cost of intermediate goods presents dynamic properties in line with the predictions of the New Keynesian theory.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: Older version of http://eprints.bbk.ac.uk/4584
    Keyword(s) / Subject(s): New Keynesian Phillips Curve, Aggregation, Sectoral Data, Intermediate Goods
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Administrator
    Date Deposited: 11 Jan 2013 13:51
    Last Modified: 02 Aug 2023 17:01
    URI: https://eprints.bbk.ac.uk/id/eprint/5957

    Statistics

    Activity Overview
    6 month trend
    991Downloads
    6 month trend
    541Hits

    Additional statistics are available via IRStats2.

    Archive Staff Only (login required)

    Edit/View Item
    Edit/View Item