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The role of relative prices in a generalized new Keynesian Phillips curve

Author

Listed:
  • Kolver Hernandez

    (CIDE A.C)

Abstract

Recent literature attributes a very large fraction of the inflation volatility to "cost-push shocks." This paper develops and estimates a microfounded DSGE model that features a first-order role for relative-price dynamics. A measure of relative price disalignments appears in the new Keynesian Phillips curve (NKPC) of the model, resembling a cost-push shock. Impulse response analysis suggests that an alternative interpretation to the effects of exogenous cost-push shocks in the NKPC relies on the endogenous response of relative prices to exogenous shocks that perturb them.

Suggested Citation

  • Kolver Hernandez, 2008. "The role of relative prices in a generalized new Keynesian Phillips curve," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 5(1), pages 35-59, Julio-Dic.
    • Handle: RePEc:qua:journl:v:5:y:2008:i:1:p:35-59
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    More about this item

    Keywords

    Relative prices; inflation dynamics; output fluctuations.;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • 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

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