Sticky Price And Sticky Information Price-Setting Models: What Is The Difference?
Abstract"Using a partial equilibrium framework, Mankiw and Reis show that a sticky information model can generate a lagged and gradual inflation response after a monetary policy shock, whereas a sticky price model cannot. Our study demonstrates that the finding is sensitive to their model's parameterization. To determine a plausible parameterization, we specify a general equilibrium model with sticky information. In that model, we find that inflation peaks only one period after a monetary disturbance. A sensitivity analysis of our results reveals that the inflation peak is delayed by including real rigidities when the monetary policy instrument is money growth, whereas inflation peaks immediately when the policy instrument is the nominal interest rate. "("JEL "E31, E32, E52) Copyright 2007 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 45 (2007)
Issue (Month): 4 (October)
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Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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