Advanced Search
MyIDEAS: Login

Integrating Sticky Prices and Sticky Information

Contents:

Author Info

  • Bill Dupor

    (Ohio State University)

  • Tomiyuki Kitamura

    (Bank of Japan)

  • Takayuki Tsuruga

    (Kansai University)

Abstract

Understanding the relationship between nominal and real variables, most notably inflation and cyclical output, is one of the fundamental questions of economics. Toward this understanding, we develop a model that integrates sticky prices and sticky information-a dual-stickiness model. We find that both rigidities are present in U.S. data. We also show that the dual-stickiness model's closest competitor is the hybrid New Keynesian model. For both models, current inflation depends in part on last period's inflation. The former model achieves this dependence endogenously through the interaction of the two rigidities rather than through backward-looking behavior. U.S. data support the dual-stickiness model over the hybrid model because lagged expectations terms appear in the former's inflation Euler equation. Finally, we show that it is quantitatively important to distinguish between the two by simulating a dynamic equilibrium model under each of the two inflation equations.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00017
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 92 (2010)
Issue (Month): 3 (August)
Pages: 657-669

as in new window
Handle: RePEc:tpr:restat:v:92:y:2010:i:3:p:657-669

Contact details of provider:
Web page: http://mitpress.mit.edu/journals/

Order Information:
Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Crucini, Mario J. & Shintani, Mototsugu & Tsuruga, Takayuki, 2010. "Accounting for persistence and volatility of good-level real exchange rates: The role of sticky information," Journal of International Economics, Elsevier, vol. 81(1), pages 48-60, May.
  2. Carrillo, Julio A., 2009. "Sticky information vs. Backward-looking indexation: Inflation inertia in the U.S," Research Memoranda 008, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
  3. Carrillo, Julio A., 2012. "How well does sticky information explain the dynamics of inflation, output, and real wages?," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 830-850.
  4. Arslan, M. Murat, 2010. "Relative importance of sticky prices and sticky information in price setting," Economic Modelling, Elsevier, vol. 27(5), pages 1124-1135, September.
  5. Benjamin D. Keen & Evan F. Koenig, 2009. "How robust are popular models of nominal frictions?," Working Papers 0903, Federal Reserve Bank of Dallas.
  6. Torres Torres, Diego José, 2009. "The Dual Stickiness Model and Inflation Dynamics in Spain," MPRA Paper 18031, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:92:y:2010:i:3:p:657-669

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.