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- Title
The Phillips curve under state-dependent pricing.
- Authors
Bakhshi, Hasan; Khan, Hashmat; Rudolf, Barbara
- Abstract
This article presents information on Phillips curve. It is informed that the Phillips curve has long served as a useful description of monetary policy effects on inflation. It is informed that the time-dependent pricing assumption implies that firms may not adjust the time pattern of their price adjustments in response to changes in macroeconomic conditions. it is further informed that in contrast to New-Kynesian Phillips curve (NKPC), the state-dependent Phillips curve allows lagged inflation terms to affect current inflation. This is an interesting feature since recent empirical evidence suggests that the NKPC extended by a lagged inflation term provides a better description of inflation dynamics than the purely forward-looking NKPC for several countries.
- Subjects
PHILLIPS curve; MATHEMATICAL models of inflation; PRICE inflation; CIRCULAR velocity of money; MONETARY policy; ECONOMIC policy
- Publication
Bank of England Quarterly Bulletin, 2004, Vol 44, Issue 3, p328
- ISSN
0005-5166
- Publication type
Article