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Costly Information, Planning Complementarities, and the Phillips Curve

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  • SUSHANT ACHARYA

Abstract

Sticky information models capture the sluggish response of aggregate prices to monetary shocks but fail to match the magnitude and frequency of price changes at the microlevel. This paper shows that accounting for the endogenous decision of when to acquire new information about different shocks can help overcome this shortcoming. In the calibrated model, prices change frequently and by large amounts in response to idiosyncratic shocks but sluggishly to monetary shocks. The paper also highlights that many predictions of the sticky information and rational inattention models are the same and thus robust to different specifications of information processing costs.

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  • Sushant Acharya, 2017. "Costly Information, Planning Complementarities, and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(4), pages 823-850, June.
    • Handle: RePEc:wly:jmoncb:v:49:y:2017:i:4:p:823-850
    DOI: 10.1111/jmcb.12399
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    Cited by:

    1. Tatsushi Okuday & Tomohiro Tsurugaz & Francesco Zanetti, 2019. "Imperfect Information, Shock Heterogeneity, and Inflation Dynamics," BCAM Working Papers 1906, Birkbeck Centre for Applied Macroeconomics.
    2. Tatsushi Okuda & Tomohiro Tsuruga & Francesco Zanetti, 2021. "Imperfect information, heterogeneous demand shocks, and inflation dynamics," CAMA Working Papers 2021-29, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    3. Camilo Morales-Jimenez, 2017. "The Cyclical Behavior of Unemployment and Wages under Information Frictions," Finance and Economics Discussion Series 2017-047, Board of Governors of the Federal Reserve System (U.S.).
    4. Camilo Morales-Jimenez, 2017. "The Cyclical Behavior of Unemployment and Wages under Information Frictions," 2017 Meeting Papers 366, Society for Economic Dynamics.

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    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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