Pervasive Stickiness (Expanded Version)

N. Gregory Mankiw
Authors registered in the RePEc Author Service: Ricardo Reis

No 5521, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper explores a macroeconomic model of the business cycle in which stickiness of information is pervasive. We start from a familiar benchmark classical model and add to it the assumption that there is sticky information on the part of consumers, workers, and firms. We evaluate the model against three key facts that describe short-run fluctuations: the acceleration phenomenon, the smoothness of real wages, and the gradual response of real variables to shocks. We find that pervasive stickiness is required to fit the facts. We conclude that models based on stickiness of information offer the promise of fitting the facts on business cycles while adding only one new plausible ingredient to the classical benchmark.

Keywords: Business cycles; Sticky information (search for similar items in EconPapers)
JEL-codes: E10 E30 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

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Working Paper: Pervasive Stickiness (Expanded Version) (2006)
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