Sectoral Phillips curves and the aggregate Phillips curve

Sector-level Phillips curves are estimated in French data. There is considerable heterogeneity across sectors, with vastly different estimates of the backward looking component of inflation and the duration of nominal rigidities. A multi-sector model of inflation dynamics is calibrated on the basis...

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Bibliographic Details
Published in:Journal of monetary economics 2011-05, Vol.58 (4), p.328-344
Main Authors: Imbs, Jean, Jondeau, Eric, Pelgrin, Florian
Format: Article
Language:English
Subjects:
Comparative analysis
Economic dynamics
Economic models
Economics and Finance
France
Humanities and Social Sciences
Inflation
Macroeconomics
Phillips curve
Sticky prices
Studies
Wage rigidity
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Summary:Sector-level Phillips curves are estimated in French data. There is considerable heterogeneity across sectors, with vastly different estimates of the backward looking component of inflation and the duration of nominal rigidities. A multi-sector model of inflation dynamics is calibrated on the basis of these sectoral estimates. Aggregate inflation, simulated on the basis of heterogeneous sectors, displays comparable dynamics to actual data. A comparison is drawn between the policy trade-offs implied by a Phillips curve based on macroeconomic estimates vs. one based on a model with heterogeneous sectors. The difference is sizeable. ► New Keynesian Phillips curves (NKPC) fit quarterly sectoral French data on prices and marginal costs. ► The structural parameters arising from sectoral NKPC are plausible. ► Heterogeneity matters also for policy.
ISSN:0304-3932
1873-1295
DOI:10.1016/j.jmoneco.2011.05.013