We develop and estimate a structural model of inflation that allows for a fraction of firms that use a backward looking … measures of arginal cost as the relevant determinant of inflation, as the theory suggests, instead of an ad-hoc output gap …. Real marginal costs are a significant and quantitatively important determinant of inflation. Backward looking price setting …

for the unemployment-inflation tradeoff and for the conduct of monetary policy.<br><br>We proceed in two steps. We first … setting by firms. We derive the relation between inflation and unemployment and discuss how it is influenced by the presence … of labor market frictions and real wage rigidities. We show the nature of the tradeoff between inflation and unemployment …

for the mild effects on inflation and economic activity of the recent increase in the price of oil: (a) good luck (i …

perspective on the linkages among monetary policy, inflation, and the business cycle. It is argued that the adoption of an …

as a tool to compare the characteristics of European inflation dynamics with those observed in the U.S. We also analyze … the factors underlying inflation inertia by examining the cyclical behavior of marginal costs, as well as that of its two … is substantial, but in line with survey evidence and U.S. estimates, (c) inflation dynamics in the Euro area appear to …