Great recession and the informational shifts: new evidence from sticky information Phillips curve

Saten Kumar

Applied Economics Letters, 2020, vol. 27, issue 1, 1-4

Abstract: We utilize the nonlinear least squares (NLLS) and seemingly unrelated regression (SUR) techniques to estimate information stickiness parameter λ for the USA. We find that λ values appeared in a somewhat humped shape or inverted U pattern during the financial crisis. Prior to the financial crisis (1978.Q1-2006.Q4), λ was around 0.3. However, when the sample is extended to include the financial crisis period (1978.Q1-2011.Q4), λ increased to around 0.6. Results imply that during the financial crisis many firms became flexible and efficient and used updated information to set optimal prices.

Date: 2020
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DOI: 10.1080/13504851.2019.1602704

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