Sticky Prices vs. Sticky Information – A Cross-Country Study of Inflation Dynamics

Christian Bredemeier and Henry Goecke

No 255, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: This paper empirically compares sticky-price and sticky-information Phillips curves considering inflation dynamics in six countries (US, UK, Germany, France, Canada, and Japan). We evaluate the models' abilities to match empirical second moments of inflation. Under baseline calibrations, the two models perform similarly in almost all countries. Under estimated parametrizations, sticky information performs better in France while sticky prices dominate in the UK and Germany. Sticky prices match unconditional moments of inflation dynamics better while sticky information is more successful in matching co-movement of inflation with demand. Both models' performances worsen where inflation dynamics differ from the US benchmark.

Keywords: Phillips curve; sticky information; sticky prices (search for similar items in EconPapers)
JEL-codes: E31 E32 E37 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:255

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