Searching for additional sources of inflation persistence: the micro-price panel data approach

It is often argued that the baseline New-Keynesian model, which relies solely on the notion of infrequent price adjustment, cannot account for the observed degree of inflation sluggishness. Therefore it is a common practice among macro modellers to introduce an ad hoc additional source of persistence to their models. Yet, the empirical validity of this practice has never been formally tested. This paper attempts to examine whether there is some additional persistence present in the data on micro-prices, beyond that implied by infrequent price adjustment. We consider two distinct sets of assump... Mehr ...