EconPapers    
Economics at your fingertips  
 

Integrating Sticky Prices and Sticky Information

Bill Dupor (), Tomiyuki Kitamura and Takayuki Tsuruga ()
Additional contact information
Tomiyuki Kitamura: Bank of Japan

The Review of Economics and Statistics, 2010, vol. 92, issue 3, 657-669

Abstract: Understanding the relationship between nominal and real variables, most notably inflation and cyclical output, is one of the fundamental questions of economics. Toward this understanding, we develop a model that integrates sticky prices and sticky information-a dual-stickiness model. We find that both rigidities are present in U.S. data. We also show that the dual-stickiness model's closest competitor is the hybrid New Keynesian model. For both models, current inflation depends in part on last period's inflation. The former model achieves this dependence endogenously through the interaction of the two rigidities rather than through backward-looking behavior. U.S. data support the dual-stickiness model over the hybrid model because lagged expectations terms appear in the former's inflation Euler equation. Finally, we show that it is quantitatively important to distinguish between the two by simulating a dynamic equilibrium model under each of the two inflation equations.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (31) Track citations by RSS feed

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00017 link to full text (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:92:y:2010:i:3:p:657-669

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Amitabh Chandra, Olivier Coibion, Bryan S. Graham, Shachar Kariv, Amit K. Khandelwal, Asim Ijaz Khwaja, Brigitte C. Madrian and Rohini Pande

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by Ann Olson ().

 
Page updated 2019-08-20
Handle: RePEc:tpr:restat:v:92:y:2010:i:3:p:657-669