@techreport{NBERw7551,
 title = "Inflation Dynamics: A Structural Econometric Analysis",
 author = "Jordi Gali and Mark Gertler",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "7551",
 year = "2000",
 month = "February",
 URL = "http://www.nber.org/papers/w7551",
 abstract = {We develop and estimate a structural model of inflation that allows for a fraction of firms that use a backward looking rule to set prices. The model nests the purely forward looking New Keynesian Phillips curve as a particular case. We use 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, while statistically significant, is not quantitatively important. Thus, we conclude that the New Keynesian Phillips curve provides a good first approximation to the dynamics of inflation.},
}