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A Quantitative Comparison Of Sticky-Price And Sticky-Information Models Of Price Setting

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  • Michael Kiley

Abstract

This paper presents baseline sticky-price and sticky-information models of price-setting, and modifies each to incorporate some “rule-of-thumb†price-setters that index to inflation over recent periods. These models are estimated for the United States via maximum-likelihood techniques. While the baseline sticky-information model generates a bit more endogenous inertia in inflation than the baseline sticky-price model, its overall fit is worse. The results point toward substantial gains in terms of fit for hybrid models with indexation that smoothes through quarterly volatility in inflation and clarify the relative performance of recent sticky-information models proposed in the literature

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2005 with number 183.

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Date of creation: 11 Nov 2005
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Handle: RePEc:sce:scecf5:183

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Keywords: Phillips curve; New-Keynesian model; Inflation;

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