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Sticky Prices vs. Sticky Information – A Cross-Country Study of Inflation Dynamics

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  • Christian Bredemeier
  • Henry Goecke

    ()

Abstract

This paper empirically compares sticky-price and sticky-information Phillips curves considering inflation dynamics in six countries (US, UK, Germany, France, Canada, and Japan). We evaluate the models‘ abilities to match empirical second moments of inflation. Under baseline calibrations, the two models perform similarly in almost all countries. Under estimated parametrizations, sticky information performs better in France while sticky prices dominate in the UK and Germany. Sticky prices match unconditional moments of inflation dynamics better while sticky information is more successful in matching co-movement of inflation with demand. Both models‘ performances worsen where inflation dynamics diff er from the US benchmark.

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File URL: http://repec.rwi-essen.de/files/REP_11_255.pdf
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Bibliographic Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0255.

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Length: 37 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:rwi:repape:0255

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Related research

Keywords: Phillips curve; sticky information; sticky prices;

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