Ricerc@Sapienza

We augmented a macro-model with intrinsic-inflation inertia assuming that prices farer in the past are more likely to be reset. We estimated the model for seven industrialized economies to compare their price/wage structures and to explore the potential nexus between changes the price/wage structure and changes in policy stances. We find evidence for duration-dependent-price adjustments in all the country of the sample. Although positively sloped, after few periods, price-hazard functions often become flat as in Calvo-based models.

Our paper derives and estimates a New Keynesian wage Phillips curve that accounts for intrinsic inertia. Our approach considers a wage-setting model featuring an upward-sloping hazard function, that is based on the notion that the probability of resetting a wage depends on the time elapsed since the last reset. According to our specification, we obtain a wage Phillips curve that also includes backward-looking terms, which account for persistence. We test the slope of the hazard function using GMM estimation.