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Inflation, Information Rigidity, and the Sticky Information Phillips Curve

  • César Carrera

    (Central Reserve Bank of Peru)

  • Nelson Ramírez-Rondán

    (Central Reserve Bank of Peru)

The Great Moderation is characterized for being a stable period in terms of macroeconomic conditions, specially in inflation. In terms of the sticky information theory, this environment may provide few incentives for agents to update information on inflation and then a new slope of the sticky information Phillips curve should be observed. We estimate the degree of information rigidity implied by the sticky information Phillips curve proposed by Mankiw and Reis (2002). Using threshold models we identify regimes of high and low inflation and find that each regime is associated with a specific degree of information stickiness. We find evidence that agents update information faster when inflation is higher.

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Paper provided by Peruvian Economic Association in its series Working Papers with number 2014-1.

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Date of creation: Jan 2014
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Handle: RePEc:apc:wpaper:2014-001
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