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A Sticky-Dispersed Information Phillips Curve: A model with partial and delayed information

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Author Info

  • Marta Areosa

    ()
    (Banco Central do Brasi)

  • Waldyr Areosa

    ()
    (Banco Central do Brasil)

  • Vinicius Carrasco

    ()
    (Department of Economics PUC-Rio)

Abstract

We study the interaction between dispersed and sticky information by assuming that firms receive private noisy signals about the state in an otherwise standard model of price setting with sticky-information. We show that there exists a unique equilibrium of the incomplete information game induced by the firms’ pricing decisions, and derive the resulting Sticky-Dispersed Information (SDI) Phillips curve. The (equilibrium) aggregate price level and the inflation rates we derive depend on all values they have taken in the past. We perform several numerical simulations to evaluate how the Sticky-Dispersed Phillips curve we derive respond to changes in the main parameters of the model.

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Bibliographic Info

Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 565.

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Length: 34p
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:rio:texdis:565

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Keywords: Sticky information; dispersed information; Phillips curve JEL Codes: D82; D83; E31;

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References

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  1. Grossman, Sanford J, 1981. "An Introduction to the Theory of Rational Expectations under Asymmetric Information," Review of Economic Studies, Wiley Blackwell, vol. 48(4), pages 541-59, October.
  2. Christopher D. Carroll, 2003. "Macroeconomic Expectations Of Households And Professional Forecasters," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 269-298, February.
  3. Mario J. Crucini & Mototsugu Shintani & and Takayuki Tsuruga, 2008. "Accounting for Persistence and Volatility of Good-level Real Exchange Rates: The Role of Sticky Information," IMES Discussion Paper Series 08-E-05, Institute for Monetary and Economic Studies, Bank of Japan.
  4. Philippe Bacchetta & Eric van Wincoop, 2003. "Can Information Heterogeneity Explain the Exchange Rate Determination Puzzle?," Working Papers 03.02, Swiss National Bank, Study Center Gerzensee.
  5. Ricardo Reis, 2009. "Optimal Monetary Policy Rules in an Estimated Sticky-Information Model," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 1-28, July.
  6. 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, MIT Press, vol. 117(4), pages 1295-1328, November.
  7. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  8. Venky Venkateswaran & Christian Hellwig, 2009. "Setting The Right Prices for the Wrong Reasons," 2009 Meeting Papers 260, Society for Economic Dynamics.
  9. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  10. George-Marios Angeletos & Jennifer La'O, 2009. "Incomplete Information, Higher-Order Beliefs and Price Inertia," NBER Working Papers 15003, National Bureau of Economic Research, Inc.
  11. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
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Cited by:
  1. Bruno Martins, 2012. "Local Market Structure and Bank Competition: evidence from the Brazilian auto loan market," Working Papers Series 299, Central Bank of Brazil, Research Department.
  2. Waldyr Areosa & Marta Areosa, 2012. "Information (in) Chains: information transmission through production chains," Working Papers Series 286, Central Bank of Brazil, Research Department.
  3. Angelo Marsiglia Fasolo, 2012. "A Note on Particle Filters Applied to DSGE Models," Working Papers Series 281, Central Bank of Brazil, Research Department.
  4. Marta Areosa & Waldyr Areosa, 2012. "Asset Prices and Monetary Policy – A sticky-dispersed information model," Working Papers Series 285, Central Bank of Brazil, Research Department.

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