Inventories, inflation dynamics and the New Keynesian Phillips curve

► We develop a New Keynesian monetary model with inventories for final goods. ► We show that the Phillips curve depends on the inventory-sales ratio. ► In order to analyze inflation dynamics we estimate the New Keynesian Phillips curve using GMM. ► The inventory specification does not improve upon the standard New Keynesian Phillips curve. ► Time series for unobservable marginal cost can be constructed from optimality conditions.