Real wage rigidities have recently been proposed as a way of building intrinsic persistence in inflation within the context of New Keynesian Phillips Curves. Using two recent illustrative structural models, we evaluate empirically the importance of real wage rigidities in the data and the extent to which such models provide useful information regarding price stickiness.
Staff working papers
Weak identification is likely to be prevalent in multi-equation macroeconomic models such as in dynamic stochastic general equilibrium setups. Identification difficulties cause the breakdown of standard asymptotic procedures, making inference unreliable.
Using identification-robust methods, the authors estimate and evaluate for Canada and the United States various classes of inflation equations based on generalized structural Calvo-type models. The models allow for different forms of frictions and vary in their assumptions regarding the type of price indexation adopted by firms.
Fluctuations in the prices of various natural resource products are of concern in both policy and business circles; hence, it is important to develop accurate price forecasts.
The authors address empirically the implications of structural breaks in the variance-covariance matrix of inflation and import prices for changes in pass-through.
Inflation Dynamics and the New Keynesian Phillips Curve: An Identification-Robust Econometric AnalysisThe authors use identification-robust methods to assess the empirical adequacy of a New Keynesian Phillips curve (NKPC) equation.
The authors use simple new finite-sample methods to test the empirical relevance of the New Keynesian Phillips curve (NKPC) equation.
The authors test the statistical significance of Pindyck's (1999) suggested class of econometric equations that model the behaviour of long-run real energy prices.
Postulating two different specifications for the Canadian Phillips curve (a purely backwardlooking model, and a partly backward-, partly forward-looking model), the authors test for structural breaks in the parameters of the equation. In each case, they account for the possibilities that: (i) breaks can be discrete, or continuous, and (ii) available data samples may be too small to justify using asymptotically valid structural-change tests.
Pricing-to-market (PTM) theory suggests that monopolistic firms which export adjust their destination-specific markups in reaction to exchange rate shocks. These adjustments limit changes in the price of their exports.