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A Sticky-information General Equilibrium Model por Policy Analysis

In: Monetary Policy under Uncertainty and Learning

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  • Ricardo Reis

    (National Bureau of Economic Research)

Abstract

This paper presents a dynamic stochastic general-equilibrium model with a single friction in all markets: sticky information. In this economy, agents are inattentive because of the high cost of acquiring, absorbing and processing information, so that the actions of consumers, workers and firms are slow to incorporate news. This paper presents the details of the behavior of an economy with pervasive inattentiveness functions, and develops a set of algorithms that solve the model quickly. It then applies these to estimate the model using post-1986 data for the United States and post-1993 for the Eurozone, and to conduct counterfactual policy experiments. The end result is a laboratory that is rich enough to account for the dynamics of at least five macroeconomic series (inflation, output, hours, interest rates, and wages), and which can be used to inform applied monetary policy.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

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This chapter was published in: Klaus Schmidt-Hebbel & Carl E. Walsh & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.) Monetary Policy under Uncertainty and Learning, , chapter 8, pages 227-283, 2009.

This item is provided by Central Bank of Chile in its series Central Banking, Analysis, and Economic Policies Book Series with number v13c08pp227-283.

Handle: RePEc:chb:bcchsb:v13c08pp227-283

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