inflation rate, with and with- out an increase in the risk premium on equities, was then simulated with a number of model … cost was 3 percentage points less than that for corporate capital) and the manner in which inflation magnifies it (the … finance instruments would overcome this reallocation but at the expense of corporate capital. Only a reduction in inflation or …

Most wage-contracting models with rational expectations fail to replicate the persistence in inflation observed in the … data. We argue that coordination problems and multiple equilibria are the keys to explaining inflation persistence. We … thus rational. Based on quarterly U.S. data over the period 1955-2000, we find evidence that inflation is more persistent …