English, Article, Journal or magazine article edition: Sticky Information vs. Sticky Prices: A Horse Race in a DSGE Framework Mathias Trabandt

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Sticky Information vs. Sticky Prices: A Horse Race in a DSGE Framework
Author
  • Mathias Trabandt
Physical Description
  • preprint
Notes
  • Mankiw and Reis (2002) have proposed sticky information as an alternative to Calvo sticky prices in order to model the conventional view that i) inflation reacts with delay and gradually to a monetary policy shock, ii) announced and credible disinflations are contractionary and iii) inflation accelerates with vigorous economic activity. We develop a fully-fledged DSGE model with sticky information and compare it to Calvo sticky prices, allowing also for dynamic inflation indexation as in Christiano, Eichenbaum and Evans (2001). We find that both models do equally well in delivering the conventional view
  • RePEc:red:sed004:543
  • How can we explain the observed behavior of aggregate inflation in response to e.g. monetary policy changes? Mankiw and Reis (2002) have proposed sticky information as an alternative to Calvo sticky prices in order to model the conventional view that i) inflation reacts with delay and gradually to a monetary policy shock, ii) announced and credible disinflations are contractionary and iii) inflation accelerates with vigorous economic activity. I use a fully-fledged DSGE model with sticky information and compare it to Calvo sticky prices, allowing also for dynamic inflation indexation as in Christiano, Eichenbaum, and Evans (2005). I find that sticky information and sticky prices with dynamic inflation indexation do equally well in my DSGE model in delivering the conventional view.
  • sticky information, sticky prices, inflation indexation, DSGE
  • RePEc:kie:kieliw:1369
Language
  • English
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