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Discussion Paper

No. 2007-46 | October 11, 2007
What Do Micro Price Data Tell Us on the Validity of the New Keynesian Phillips Curve?

Abstract

The New Keynesian Phillips curve (NKPC) is now the dominant model of inflation dynamics. In recent years, a large body of empirical research has documented price-setting behaviour at the individual level, allowing the assessment of the micro-foundations of pricing models. This paper analyses the implications of 25 theoretical models in terms of individual behaviour and finds that they considerably differ in their ability to match the key micro stylised facts. However, none is available to account for all of them, suggesting the need to develop more realistic micro-founded price setting models.

JEL Classification

D40 E31

Cite As

Luis J. Alvarez (2007). What Do Micro Price Data Tell Us on the Validity of the New Keynesian Phillips Curve?. Economics Discussion Papers, No 2007-46, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2007-46

Assessment



Comments and Questions


Anonymous - Referee Report
November 08, 2007 - 16:54

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Anonymous - Comments on "What Do Micro Price Data Tell Us on the Validity of the New Keynesian Phillips Curve?" by Luis J. Alvarez
November 20, 2007 - 11:08

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Anonymous - Invited Reader's Comment
November 23, 2007 - 09:59

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Michael Dotsey - Invited Reader's Comment
December 05, 2007 - 14:21

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Anonymous - Referee Report
January 02, 2008 - 11:36

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Luis J. Álvarez - Response to referees and commentators
May 23, 2008 - 09:53

See attached file