Munich Personal RePEc Archive

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

Drissi, Ramzi and Ghassan, Hassan B. (2018): Sticky Price versus Sticky Information Price: Empirical Evidence in the New Keynesian Setting.

WarningThere is a more recent version of this item available.
[img] PDF
MPRA_paper_93075.pdf

Download (959kB)

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.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.