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This dissertation investigates the empirical validity of several theories on \u85rms price-setting behavior and the dynamics of ination. The dissertation consists of two essays. The rst essay, Reassessment of the New Keynesian Phillips Curve: Gross vs. Value-Added Price Ination, reexamines the new Keynesian Phillips curve based on the distinction between gross price and value-added price ination. It is shown that a standard new Keynesian Phillips curve can be interpreted as describing the behavior of gross price ination and, therefore, it is essential to incorporate intermediate input costs in constructing marginal cost measures. Moreover, from this gross price ination model, the valued-added price ination model is derived explicitly, in which the real price of intermediate inputs plays an important role. The new Keynesian Phillips curve is tested using both ination models. Our results show that (1) the evidence for the new Keynesian Phillips curve is weak for the whole sample period regardless of model speci\u85cation; (2) in some subsamples, however, especially during high an