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Heterogeneous Sticky-Information Economies

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  • Carvalho, Carlos Viana de

Abstract

The literature that emerged from Mankiw and Reis' (2002) proposal of sticky information as an alternative to sticky-price models has focused on economies populated with (ex-ante) identical firms. This paper analyzes the implications of heterogeneity in the degree of information stickiness among price-setting firms in different sectors for the dynamic response of the economy to various shocks. I compare multisector sticky-information models with otherwise identical one-sector economies that feature the same frequency of information updating. I find that the effects of such shocks on the output gap -- the difference between actual output and the output level that would prevail in the absence of information frictions -- are larger in heterogeneous economies.

Suggested Citation

  • Carvalho, Carlos Viana de, 2017. "Heterogeneous Sticky-Information Economies," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 37(2), November.
    • Handle: RePEc:sbe:breart:v:37:y:2017:i:2:a:57627
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    1. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-113, May.
    2. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1295-1328.
    3. Laurence Ball & David Romer, 1990. "Real Rigidities and the Non-Neutrality of Money," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 183-203.
    4. Carvalho, Carlos & Schwartzman, Felipe, 2015. "Selection and monetary non-neutrality in time-dependent pricing models," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 141-156.
    5. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
    6. Ricardo Reis, 2006. "Inattentive Producers," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(3), pages 793-821.
    7. Carvalho Carlos, 2006. "Heterogeneity in Price Stickiness and the Real Effects of Monetary Shocks," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(3), pages 1-58, December.
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