Inflation persistence when price stickiness differs between industries
By: Kevin D. Sheedy.
Contributors: London School of Economics and Political Science. Centre for Economic Performance.
Series: CEP discussion paper -- no. 838
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Published: 2007
Place of publication: London
Language: eng
Format: Electronic resource
Description: There is much evidence that price-adjustment frequencies vary widely across industries. This paper shows that inflation persistence is lower with heterogeneity in price stickiness than without it, taking as given the degree of persistence in variables affecting inflation. Differences in the frequency of price adjustment mean that the pool of firms which responds to any macroeconomic shock is unrepresentative, containing a disproportionately large number of firms from industries with more flexible prices. Consequently, this group of firms is more likely to reverse any initial price change after a shock has dissipated, making inflation persistence much harder to explain.
Notes: Title from publisher's abstract page (viewed on Jan. 4, 2008).

"November 2007."

Includes bibliographical references.

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