Hostname: page-component-586b7cd67f-dlnhk Total loading time: 0 Render date: 2024-11-27T21:55:33.540Z Has data issue: false hasContentIssue false
  • English
  • Français

A STICKY–DISPERSED INFORMATION PHILLIPS CURVE: A MODEL WITH PARTIAL AND DELAYED INFORMATION

Published online by Cambridge University Press:  18 December 2018

Marta B. M. Areosa ,
Waldyr D. Areosa  and
Vinicius Carrasco
Marta B. M. Areosa*
Affiliation:
Banco Central do Brasil PUC-Rio
Waldyr D. Areosa
Affiliation:
Banco Central do Brasil PUC-Rio
Vinicius Carrasco
Affiliation:
PUC-Rio
*
Address correspondence to: Marta B. M. Areosa, Research Department, Banco Central do Brasil, Av. Presidente Vargas 730, Centro, CEP. 20071-900, Rio de Janeiro, RJ, Brasil; e-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

We study the interaction between dispersed and sticky information by assuming that firms receive private noisy signals about the state in an otherwise standard model of price setting with sticky information. We compute the unique equilibrium of the game induced by the firms’ pricing decisions and derive the resulting Phillips curve. The main effect of dispersion is to magnify the immediate impact of a given shock when the degree of stickiness is small. Its effect on persistence is minor: even when information is largely dispersed, a substantial amount of informational stickiness is needed to generate persistence in aggregate prices and inflation.

Keywords

Sticky InformationDispersed InformationPhillips Curve
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 4 , June 2020 , pp. 747 - 773
Copyright
© Cambridge University Press 2018

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This paper is based on the first chapter of Marta Areosa’s PhD thesis (2010). We would like to thank Márcia Leon, Leonardo Rezende, Luciano Vereda, and Fábio Araújo. We are also grateful for comments from many seminar participants at PUC-Rio and Banco Central do Brasil. The financial support from Banco Central do Brasil is gratefully acknowledged. We are responsible for all errors and interpretations. The views expressed in the paper are those of the authors and do not necessarily reflect those of the Banco Central do Brasil.

References

Andrade, P., Crump, R. K., Eusepi, S. and Moench, E. (2016) Fundamental disagreement. Journal of Monetary Economics 83(C), 106–128.CrossRefGoogle Scholar
Angeletos, G.-M. and La’O, J. (2009) Incomplete information, higher-order beliefs and prices inertia. Journal of Monetary Economics 56(Suplement 1), S19–S37.CrossRefGoogle Scholar
Angeletos, G.-M. and Pavan, A. (2007) Efficient use of information and social value of information. Econometrica 75(4), 1103–1142.CrossRefGoogle Scholar
Baeriswyl, R. and Cornand, C. (2010) The signaling role of policy actions. Journal of Monetary Economics 57(6), 682–695.CrossRefGoogle Scholar
Blanchard, O. J. and Kiyotaki, N. (1987) Monopolistic competition and the effects of aggregate demand. American Economic Review 77(4), 647–666.Google Scholar
Calvo, G. A. (1983) Staggered prices in a utility-maximizing framework. Journal of Monetary Economics 12(3), 383–398.CrossRefGoogle Scholar
Carrera, C. and Ramírez-Rondán, N. (2017) Inflation, information rigidity, and the sticky information Phillips curve. Macroeconomic Dynamics, 1–19.Google Scholar
Giuli, F. (2010) Robust policies in a sticky information economy. Macroeconomic Dynamics 14(3), 311–342.CrossRefGoogle Scholar
Hahn, V. (2014) Transparency in monetary policy, signaling, and heterogeneous information. Macroeconomic Dynamics 18(2), 369–394.CrossRefGoogle Scholar
Lucas, R. E. (1972) Expectations and the neutrality of money. Journal of Economic Theory 4(2), 103–124.CrossRefGoogle Scholar
Mankiw, N. G. and Reis, R. (2002) Sticky information versus sticky prices: A proposal to replace the new Keynesian Phillips curve. Quarterly Journal of Economics 117(4), 1295–1328.CrossRefGoogle Scholar
Mankiw, N. G. and Reis, R. (2006) Pervasive stickiness. American Economic Review: Papers and Proceedings 96(2), 164–169.CrossRefGoogle Scholar
Mankiw, N. G. and Reis, R. (2007) Sticky information in general equilibrium. Journal of the European Economic Association 5(2–3), 603–613.CrossRefGoogle Scholar
Mankiw, N. G. and Reis, R. (2010) Imperfect information and aggregate supply. In: Friedman, B. M. and Woodford, M. (eds.), Handbook of Monetary Economics 1st ed., Chapter 5, Vol. 3A, pp. 183–229. Amsterdam: Elsevier/North-Holland.CrossRefGoogle Scholar
Morris, S. and Shin, H. S. (2002) The social value of public information. American Economic Review 92(5), 1521–1534.CrossRefGoogle Scholar
Phelps, E. S. (1968) Money-wage dynamics and labor market equilibrium. Journal of Political Economy 76(4), 678–711.CrossRefGoogle Scholar
Reis, R. (2006a) Inattentive consumers. Journal of Monetary Economics 53(8), 1761–1800.CrossRefGoogle Scholar
Reis, R. (2006b) Inattentive producers. Review of Economic Studies 73(3), 793–821.CrossRefGoogle Scholar
Reis, R. (2009) Optimal monetary policy rules in an estimated sticky-information model. American Economic Journal: Macroeconomics 1(2), 1–28.Google Scholar
Sims, C. A. (2003) Implications of rational inattention. Journal of Monetary Economics 50(3), 665–690.CrossRefGoogle Scholar
Sims, C. A. (2010) Rational inattention and monetary economics. In: Friedman, B. M. and Woodford, M. (eds.), Handbook of Monetary Economics 1st ed., Chapter 4, Vol. 3A, pp. 155–181. Amsterdam: Elsevier/North-Holland.CrossRefGoogle Scholar
Tang, J. (2013) Uncertainty and the Signaling Channel of Monetary Policy. Federal Reserve Bank of Boston Working Papers: 15-8.Google Scholar
Veldkamp, L. (2011) Information Choice in Macroeconomics and Finance. Princeton: Princeton University Press.CrossRefGoogle Scholar
Woodford, M. (2003) Imperfect common knowledge and the effects of monetary policy. In Aghion, P., Frydman, R., Stiglitz, J. and Woodford, M. (eds.), Knowledge, Information, and Expectations in Modern Macroeconomics: In Honor of Edmund S. Phelps, pp. 25–58. Princeton and Oxford: Princeton University Press.Google Scholar