Benati, Luca
August 2008
Quarterly Journal of Economics;Aug2008, Vol. 123 Issue 3, p1005
Academic Journal
Under inflation, targeting estimates of the indexation parameter in hybrid New Keynesian Phillips curves are either equal to zero, or very low, in the United Kingdom, Canada, Sweden, and New Zealand. Analogous results hold for the Euro area under the European Monetary Union, and for Switzerland under the new monetary regime: under stable regimes with clearly defined nominal anchors, inflation appears to be purely forward-looking. These results question the notion that the intrinsic inflation persistence found in post-WWII U.S. data is structural in the sense of Lucas (Carnegie-Rochester Conference Series on Public Policy, 1 [1976], 19-46), and suggest that "hardwiring" inflation persistence in macroeconomic models is potentially misleading.


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