However, in a more complex model with wage and real rigidities of the sort that have become standard in dynamic general equilibrium modelling, inflation inherits persistence from the inertia that the real rigidities inject into firms’ real marginal costs. In this latter case, augmenting price-level inertia – a higher Calvo parameter – increases inertia in inflation.
See for example the discussion in L. J. Christiano, M. Eichenbaum, and C. Evans (2005), “Nominal rigidities and the dynamic effects of a shock to monetary policy”, Journal of Political Economy, 113(1), pp. 1-45. Benati (2007), op.