RBA: price stickiness overstated in traditional models
A paper published by the Reserve Bank of Australia this month entitled 'Reconciling microeconomic and macroeconomic estimates of price stickiness' shows that estimates of the New-Keynesian Phillips Curve considerably overstate the true degree of price stickiness and may falsely suggest that some prices are indexed to past inflation.
The degree of price stickiness has a major influence on the behaviour of inflation and is an important determinant of the effects of monetary policy; all else being
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