Costly Information, Planning Complementarities, and the Phillips Curve

Sushant Acharya

Journal of Money, Credit and Banking, 2017, vol. 49, issue 4, 823-850

Abstract: Sticky information models capture the sluggish response of aggregate prices to monetary shocks but fail to match the magnitude and frequency of price changes at the microlevel. This paper shows that accounting for the endogenous decision of when to acquire new information about different shocks can help overcome this shortcoming. In the calibrated model, prices change frequently and by large amounts in response to idiosyncratic shocks but sluggishly to monetary shocks. The paper also highlights that many predictions of the sticky information and rational inattention models are the same and thus robust to different specifications of information processing costs.

Date: 2017
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Citations: View citations in EconPapers (7)

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https://doi.org/10.1111/jmcb.12399

Related works:
Working Paper: Costly information, planning complementarities and the Phillips Curve (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:49:y:2017:i:4:p:823-850

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