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Sticky Information Versus Sticky Prices Revisited: A Bayesian VAR-GMM Approach

Author

Listed:
  • Takushi Kurozumi
  • Ryohei Oishi
  • Willem Van Zandweghe

Abstract

Several Phillips curves based on sticky information and sticky prices are estimated and compared using Bayesian VAR-GMM. This method derives expectations in each Phillips curve from a VAR and estimates the Phillips curve parameters and the VAR coefficients simultaneously. Quasi-marginal likelihood-based model comparison selects a dual stickiness Phillips curve in which, each period, some prices remain unchanged, consistent with micro evidence. Moreover, sticky information is a more plausible source of inflation inertia in the Phillips curve than other sources proposed in previous studies. Sticky information, sticky prices, and unchanged prices in each period are all needed to better describe inflation dynamics.

Suggested Citation

  • Takushi Kurozumi & Ryohei Oishi & Willem Van Zandweghe, 2022. "Sticky Information Versus Sticky Prices Revisited: A Bayesian VAR-GMM Approach," Working Papers 22-34, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwq:95111
    DOI: 10.26509/frbc-wp-202234
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    References listed on IDEAS

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    More about this item

    Keywords

    Sticky Information; Sticky Price; Steady-state Inflation; Inflation Inertia; Bayesian VAR-GMM;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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