A Sticky-Information General Equilibrium Model for Policy Analysis

Ricardo Reis

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: This paper presents a dynamic stochastic general-equilibrium model with a single friction in all markets: sticky information. In this economy, agents are inattentive because of the high cost of acquiring, absorbing and processing information, so that the actions of consumers, workers and firms are slow to incorporate news. This paper presents the details of the behavior of an economy with pervasive inattentiveness functions, and develops a set of algorithms that solve the model quickly. It then applies these to estimate the model using post-1986 data for the United States and post-1993 for the Eurozone, and to conduct counterfactual policy experiments. The end result is a laboratory that is rich enough to account for the dynamics of at least five macroeconomic series (inflation, output, hours, interest rates, and wages), and which can be used to inform applied monetary policy.

Date: 2008-10
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Citations: View citations in EconPapers (5)

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Related works:
Chapter: A Sticky-information General Equilibrium Model por Policy Analysis (2009)
Working Paper: A Sticky-Information General-Equilibrium Model for Policy Analysis (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:495

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