Dynamics of Sticky Information and Sticky Price Models in a New Keynesian DSGE Framework
Abstract
Recent literature on monetary policy analysis extensively uses the sticky price model of price adjustment in a New Keynesian Macroeconomic framework. This price setting model, however, has been criticized for producing implausible results regarding inflation and output dynamics. This paper examines and compares dynamic responses of the sticky price and sticky information models to a cost-push shock in a New Keynesian DSGE framework. It finds that the sticky information model produces more reasonable dynamics through lagged, gradual and hump-shaped responses to a shock as observed in data. However, these responses depend on the persistence of the shock.Download Info
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5269.Length:
Date of creation: Aug 2007
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Handle: RePEc:pra:mprapa:5269
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Keywords: Monetary policy; Sticky information; Sticky prices; Phillips curve;Other versions of this item:
- Arslan, M. Murat, 2008. "Dynamics of sticky information and sticky price models in a New Keynesian DSGE framework," Economic Modelling, Elsevier, vol. 25(6), pages 1276-1294, November.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-13 (All new papers)
- NEP-MAC-2007-10-13 (Macroeconomics)
- NEP-MON-2007-10-13 (Monetary Economics)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Jan-Oliver Menz & Lena Vogel, 2009. "A Detailed Derivation of the Sticky Price and Sticky Information New Keynesian DSGE Model," Macroeconomics and Finance Series 200902, Hamburg University, Department Wirtschaft und Politik.
- 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.
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