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Sticky Information vs. Sticky Prices: A Horse Race in a DSGE Framework

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  • Mathias Trabandt

Abstract

Mankiw and Reis (2002) have proposed sticky information as an alternative to Calvo sticky prices in order to model the conventional view that i) inflation reacts with delay and gradually to a monetary policy shock, ii) announced and credible disinflations are contractionary and iii) inflation accelerates with vigorous economic activity. We develop a fully-fledged DSGE model with sticky information and compare it to Calvo sticky prices, allowing also for dynamic inflation indexation as in Christiano, Eichenbaum and Evans (2001). We find that both models do equally well in delivering the conventional view

Suggested Citation

  • Mathias Trabandt, 2004. "Sticky Information vs. Sticky Prices: A Horse Race in a DSGE Framework," 2004 Meeting Papers 543, Society for Economic Dynamics.
    • Handle: RePEc:red:sed004:543
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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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