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Price and wage inflation persistence across countries and monetary regimes

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  • Di Bartolomeo, Giovanni
  • Di Pietro, Marco
  • Beqiraj, Elton

Abstract

We augmented a macro-model with intrinsic-inflation inertia assuming that prices farer in the past are more likely to be reset. We estimated the model for seven industrialized economies to compare their price/wage structures and to explore the potential nexus between changes the price/wage structure and changes in policy stances. We find evidence for duration-dependent-price adjustments in all the country of the sample. Although positively sloped, after few periods, price-hazard functions often become flat as in Calvo-based models. Instead, wage-hazard shapes are in line with Taylor contracts with the exceptions of France and the United Kingdom. Country comparison shows that price and wage stickiness are correlated. Regarding monetary policy stances, no systematic effect is found. Observed changes are explained by country-specific factors (e.g., market reforms).

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  • Di Bartolomeo, Giovanni & Di Pietro, Marco & Beqiraj, Elton, 2020. "Price and wage inflation persistence across countries and monetary regimes," Journal of International Money and Finance, Elsevier, vol. 109(C).
    • Handle: RePEc:eee:jimfin:v:109:y:2020:i:c:s0261560620302114
    DOI: 10.1016/j.jimonfin.2020.102255
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    Cited by:

    1. DI BARTOLOMEO, Giovanni & SERPIERI, Carolina, 2023. "Optimal monetary policy and the vintage-dependent price and wage Phillips curves: An international comparison," Working Papers 2023004, University of Antwerp, Faculty of Business and Economics.
    2. Di Bartolomeo, Giovanni & Serpieri, Carolina, 2024. "Optimal monetary policy and the time-dependent price and wage Phillips curves: An international comparison," Journal of International Money and Finance, Elsevier, vol. 146(C).

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    More about this item

    Keywords

    Duration-dependent adjustments; Intrinsic inflation persistence; DSGE models; Hybrid Phillips curves; Great Moderation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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