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Steffen Ahrens and Matthias Hartmann
 
''Cross-sectional evidence on state-dependent versus time-dependent price setting''
( 2015, Vol. 35 No.4 )
 
 
We empirically analyze aggregate price setting by means of a nonparametric representation of the structural New Keynesian Phillips curve derived from Calvo (1983) pricing for a large cross-section of 14 industrialized economies. State-dependence of the Calvo parameter is tested in a functional-coefficient regression framework. We reject state-invariant pricing. Moreover, problems reported in the extant literature of insignificant and implausible estimates of the Phillips-curve relation are mitigated in the state-dependent specification.
 
 
Keywords: State-dependent versus time-dependent pricing, Phillips curve, Functional coefficients, Conditional heteroscedasticity.
JEL: C1 - Econometric and Statistical Methods: General
E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
 
Manuscript Received : Feb 17 2015 Manuscript Accepted : Dec 13 2015

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