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A Sticky-Dispersed Information Phillips Curve: A model with partial and delayed information

  • Marta Areosa


    (Banco Central do Brasi)

  • Waldyr Areosa


    (Banco Central do Brasil)

  • Vinicius Carrasco


    (Department of Economics PUC-Rio)

We study the interaction between dispersed and sticky information by assuming that firms receive private noisy signals about the state in an otherwise standard model of price setting with sticky-information. We show that there exists a unique equilibrium of the incomplete information game induced by the firms’ pricing decisions, and derive the resulting Sticky-Dispersed Information (SDI) Phillips curve. The (equilibrium) aggregate price level and the inflation rates we derive depend on all values they have taken in the past. We perform several numerical simulations to evaluate how the Sticky-Dispersed Phillips curve we derive respond to changes in the main parameters of the model.

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Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 565.

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Length: 34p
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:rio:texdis:565
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  1. Eric van Wincoop & Philippe Bacchetta, 2003. "Can Information Heterogeneity Explain the Exchange Rate Determination Puzzle?," NBER Working Papers 9498, National Bureau of Economic Research, Inc.
  2. Ricardo Reis, 2009. "Optimal Monetary Policy Rules in an Estimated Sticky-Information Model," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 1-28, July.
  3. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky information versus sticky prices: a proposal to replace the New-Keynesian Phillips curve," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  4. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  5. Mario J. Crucini & Mototsugu Shintani & and Takayuki Tsuruga, 2008. "Accounting for Persistence and Volatility of Good-level Real Exchange Rates: The Role of Sticky Information," IMES Discussion Paper Series 08-E-05, Institute for Monetary and Economic Studies, Bank of Japan.
  6. Felipe Schwartzman & Carlos Carvalho, 2008. "Heterogeneous Price Setting Behavior and Monetary Non-neutrality: Some General Results," 2008 Meeting Papers 1040, Society for Economic Dynamics.
  7. Venky Venkateswaran & Christian Hellwig, 2009. "Setting The Right Prices for the Wrong Reasons," 2009 Meeting Papers 260, Society for Economic Dynamics.
  8. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  9. repec:tpr:qjecon:v:118:y:2003:i:1:p:269-298 is not listed on IDEAS
  10. repec:bla:restud:v:48:y:1981:i:4:p:541-59 is not listed on IDEAS
  11. Christopher D Carroll, 2002. "Macroeconomic Expectations of Households and Professional Forecasters," Economics Working Paper Archive 477, The Johns Hopkins University,Department of Economics.
  12. George-Marios Angeletos & Jennifer La'O, 2009. "Incomplete Information, Higher-Order Beliefs and Price Inertia," NBER Working Papers 15003, National Bureau of Economic Research, Inc.
  13. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
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