Sticky Information and Inflation Persistence: Evidence from U.S. Data

Benedetto Molinari

No 10.09, Working Papers from Universidad Pablo de Olavide, Department of Economics

Abstract: This paper provides a novel single equation estimator of the Sticky Information Phillips Curve (SIPC), which permits to estimate the exact model without any approximation or truncation. In detail, information stickiness is estimated by employing a GMM estimator that matches the theoretical with the actual covariances between current inflation and the lagged exogenous shocks that affect firms’ pricing decisions, which are considered the moments that measure inflation persistence. The main result of the paper is to show that the SIPC model can match inflation persistence only at the cost of mispredicting the variance of inflation, which is a novel finding in the empirical literature on the SIPC.

Keywords: Sticky Information; Inflation Persistence; two-stage GMM estimator (search for similar items in EconPapers)
JEL-codes: C51 E31 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-10
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.upo.es/serv/bib/wps/econ1009.pdf First version, 2010 (application/pdf)

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Journal Article: Sticky information and inflation persistence: evidence from the U.S. data (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pab:wpaper:10.09

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