INFLATION, INFORMATION RIGIDITY, AND THE STICKY INFORMATION PHILLIPS CURVE

The Great Moderation is characterized as a period of stable macroeconomic conditions, especially with regard to inflation. Under the sticky information theory, this environment may provide a few incentives for agents to update information on inflation, thus, producing a new slope of the sticky infor...

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Bibliographic Details
Published inMacroeconomic dynamics Vol. 23; no. 7; pp. 2597 - 2615
Main Authors Carrera, César, Ramírez-Rondán, N R
Format Journal Article
LanguageEnglish
Published Cambridge Cambridge University Press 01.10.2019
Subjects
Economic theory
Inflation
Macroeconomics
Phillips curve
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Summary:The Great Moderation is characterized as a period of stable macroeconomic conditions, especially with regard to inflation. Under the sticky information theory, this environment may provide a few incentives for agents to update information on inflation, thus, producing a new slope of the sticky information Phillips curve. We estimate the degree of information rigidity implied by the sticky information Phillips curve. Using threshold models, we identify two regimes of high and low inflation, finding that each identified regime is associated with a specific degree of information stickiness. This evidence is consistent with agents that update information faster when inflation is higher.
ISSN:1365-1005
1469-8056
DOI:10.1017/S136510051700089X