IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v18y2011i11p1083-1089.html
   My bibliography  Save this article

Inflation and marginal cost: on the importance of their covariance

Author

Listed:
  • Sandeep Mazumder

Abstract

Many researchers have found that estimating the New Keynesian Phillips Curve (NKPC) using the output gap to proxy for real marginal cost tends to produce a counter-intuitive coefficient sign in the model, whereas using the labour income share produces the expected coefficient sign. This article investigates the potential cause of this puzzle: What causes these differing signs for the coefficient for real marginal cost? We find that this coefficient sign crucially depends on the covariance between inflation and marginal cost. Moreover, this covariance in turn critically depends on the cyclicality of the marginal cost proxy that is used.

Suggested Citation

  • Sandeep Mazumder, 2011. "Inflation and marginal cost: on the importance of their covariance," Applied Economics Letters, Taylor & Francis Journals, vol. 18(11), pages 1083-1089.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:11:p:1083-1089
    DOI: 10.1080/13504851.2010.524608
    as

    Download full text from publisher

    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/13504851.2010.524608&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13504851.2010.524608?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Baxa, Jaromír & Plašil, Miroslav & Vašíček, Bořek, 2015. "Changes in inflation dynamics under inflation targeting? Evidence from Central European countries," Economic Modelling, Elsevier, vol. 44(C), pages 116-130.
    2. Sandeep Mazumder, 2012. "European Inflation and the New Keynesian Phillips Curve," Southern Economic Journal, John Wiley & Sons, vol. 79(2), pages 322-349, October.
    3. Mazumder, Sandeep, 2011. "The empirical validity of the New Keynesian Phillips curve using survey forecasts of inflation," Economic Modelling, Elsevier, vol. 28(6), pages 2439-2450.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:18:y:2011:i:11:p:1083-1089. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.