Sticky Information versus Efficient Indexation Microfoundations for Monetary Policy Models

Richard Mash ()

CDMA Conference Paper Series from Centre for Dynamic Macroeconomic Analysis

Abstract: We present an “efficient indexation” approach to price setting when full optimisation is infrequent due to decision making costs but firms observe relevant information between optimisations. Prices are updated in line with the structural characteristics of the economy and hence make efficient use of available information. Under plausible conditions this mechanism is superior to the predetermined prices of Mankiw and Reis (2002) [Sticky information versus sticky prices: A proposal to replace the New Keynesian Phillips Curve, Quarterly Journal of Economics, 117(4)]. If infrequent optimisation is caused by lack of information, indexing is infeasible and the Mankiw-Reis approach is optimal.

Keywords: Sticky Information; Rational Inattention; Indexing; Monetary Policy; Microfoundations. (search for similar items in EconPapers)
JEL-codes: E22 E52 E58 (search for similar items in EconPapers)
Date: 2008-08
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.st-andrews.ac.uk/CDMA/papers/cp0811.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:san:cdmacp:0811

Access Statistics for this paper

More papers in CDMA Conference Paper Series from Centre for Dynamic Macroeconomic Analysis School of Economics and Finance, Castlecliffe, The Scores, Fife, KY16 9AZ. Contact information at EDIRC.
Bibliographic data for series maintained by The School of Economics and Finance ().