Sticky Price versus Sticky Information Price: Empirical Evidence in the New Keynesian Setting

Ramzi Drissi and Hassan Ghassan ()

MPRA Paper from University Library of Munich, Germany

Abstract: In order to model the inflation dynamics, we investigated various combinations of nominal rigidities. For this purpose, we analyze two adjustment-of-prices hypotheses as in the new Keynesian literature, namely the price stickiness and the sticky information, within a Dynamic Stochastic General Equilibrium (DSGE) model. For each model, we compare the responses of inflation and output to shocks. We found that sticky information modeling correctly reproduces some important stylized facts after monetary shocks, but with hump-shaped responses. The sticky price model, considering that some fixed prices lead to that Phillips curve, does not correctly reproduce the dynamic inflation response to monetary shocks. We show that single indexation does not add persistence to the two specifications, and the choice of rigidity structure appears to be more important than the presence or absence of lagged values of inflation in the dynamics.

Keywords: DSGE model; Phillips curve; Sticky information; Sticky prices; Inflation (search for similar items in EconPapers)
JEL-codes: C11 E31 E32 (search for similar items in EconPapers)
Date: 2018-03, Revised 2019-04
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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https://mpra.ub.uni-muenchen.de/94926/1/MPRA_paper_93075.pdf revised version (application/pdf)

Related works:
Working Paper: Sticky Price versus Sticky Information Price: Empirical Evidence in the New Keynesian Setting (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:93075

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