IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-05483801.html

Dispersed Information, Nominal Rigidities and Monetary Business Cycles: A Hayekian Perspective

Author

Listed:
  • Christian Hellwig

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique)

  • Venky Venkateswaran

    (Stern School of Business - NYU - New York University [New York] - NYU - NYU System)

Abstract

We study the propagation of nominal shocks in a dispersed information economy where firms learn from and respond to information generated by their activities in product and factor markets. We show that imperfect information on its own has no effect on equilibrium outcomes, when firms have the flexibility to adjust prices and output instantaneously to changes in their market conditions, an outcome that we term the "Hayekian benchmark". With sticky prices, however, this irrelevance obtains only if there are no strategic complementarities in pricing and aggregate and idiosyncratic shocks are equally persistent. With complementarities and/or differences in persistence, the interaction of nominal and informational frictions slows down price adjustment, amplifying real effects from nominal shocks (relative to a full information model with only nominal frictions). In a calibrated model, the amplification is most pronounced over the medium to long term. In the short run, market generated information leads to substantial aggregate price adjustment, even though firms may be completely unaware of changes in aggregate conditions.

Suggested Citation

  • Christian Hellwig & Venky Venkateswaran, 2025. "Dispersed Information, Nominal Rigidities and Monetary Business Cycles: A Hayekian Perspective," Post-Print hal-05483801, HAL.
    • Handle: RePEc:hal:journl:hal-05483801
    DOI: 10.1016/j.jmoneco.2025.103843
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-05483801. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.