Inflation Dynamics and Real Marginal Costs: New Evidence from U.S. Manufacturing Industries

Ivan Petrella; Emiliano Santoro

doi:10.1016/j.jedc.2012.01.009,

Inflation Dynamics and Real Marginal Costs: New Evidence from U.S. Manufacturing Industries

Ivan Petrella, Emiliano Santoro

Department of Economics

11 Citations (Scopus)

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). We challenge this evidence, showing that forward-looking behavior 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.

Original language	English
Journal	Journal of Economic Dynamics and Control
Volume	36
Issue number	5
Pages (from-to)	779–794
ISSN	0165-1889
DOIs	https://doi.org/10.1016/j.jedc.2012.01.009,
Publication status	Published - May 2012

Keywords

Faculty of Social Sciences

Access to Document

10.1016/j.jedc.2012.01.009,

Cite this

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title = "Inflation Dynamics and Real Marginal Costs: New Evidence from U.S. Manufacturing Industries",

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). We challenge this evidence, showing that forward-looking behavior 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.",

keywords = "Faculty of Social Sciences, New Keynesian Phillips curve, Aggregation, Sectoral data, Intermediate goods",

author = "Ivan Petrella and Emiliano Santoro",

note = "JEL classification: E31; L60 ",

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T1 - Inflation Dynamics and Real Marginal Costs

T2 - New Evidence from U.S. Manufacturing Industries

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AU - Santoro, Emiliano

N1 - JEL classification: E31; L60

PY - 2012/5

Y1 - 2012/5

N2 - 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). We challenge this evidence, showing that forward-looking behavior 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.

AB - 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). We challenge this evidence, showing that forward-looking behavior 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.

KW - Faculty of Social Sciences

KW - New Keynesian Phillips curve

KW - Aggregation

KW - Sectoral data

KW - Intermediate goods

U2 - 10.1016/j.jedc.2012.01.009,

DO - 10.1016/j.jedc.2012.01.009,

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JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

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