Sticky prices vs. sticky information
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Date
2012-06-12
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Abstract
This paper compares sticky-price and sticky-information Phillips
curves empirically considering inflation dynamics in eleven countries
(the G7 and Scandinavia). We evaluate the models` abilities to match
empirical second moments of inflation. Although overall model performance
is similar, there is a strong systematic pattern in model
performance by moment type. Sticky prices match unconditional moments
of inflation dynamics clearly better while sticky information is
considerably more successful in matching co-movements of inflation
with demand.
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Keywords
Phillips curve, sticky information, sticky prices