Empirical Comparison of Sticky Price and Sticky Information Models

Oleg Korenok

Macroeconomics from University Library of Munich, Germany

Abstract: The goal of this paper is to provide a fair empirical comparison of two alternative explanations of the relationship between aggregate price and output. We compare the empirical performance of the sticky price and the Mankiw and Reis (2002) sticky information models. We put both models in a similar analytical form and use the same data set on unit labor cost and aggregate prices in the U.S. after WWII to evaluate the models. We use the Bayesian full information likelihood approach for parameter estimation, uncertainty evaluation, and model comparison. Statistical comparison of the two non-nested models and estimates of the empirical encompassing model lead to the same result - the sticky information model is dominated by the sticky price model.

Keywords: sticky price; sticky information; model selection; full information likelihood; Bayesian model comparison (search for similar items in EconPapers)
JEL-codes: C32 E12 E3 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005-10-03
New Economics Papers: this item is included in nep-mac
Note: Type of Document - pdf; pages: 30
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Empirical comparison of sticky price and sticky information models (2008)
Working Paper: Empirical Comparison of Sticky Price and Sticky Information Models (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0510004

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