Download or read book Can the New Keynesian Phillips Curve Explain Japanese Inflation Dynamics? written by Ichiro Muto and published by . This book was released on 2006 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate a New Keynesian Phillips curve (NKPC) for Japan's economy. To obtain a better proxy of real marginal cost (RMC), we correct labor share by incorporating labor adjustment costs, material prices, and real wage rigidity. Our approach is unique in utilizing the information on firms' judgment about the labor gap, which implies the existence of labor adjustment costs. Our results show that the NKPC explains Japanese inflation dynamics quite well if we use the corrected proxy of RMC. Furthermore, we find that Japanese inflation persistence is mostly accounted for by the persistence of RMC itself rather than lagged inflation.--Publisher's description.