Dynamics of sticky information and sticky price models in a New Keynesian DSGE framework

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Arslan M. M.

ECONOMIC MODELLING, cilt.25, sa.6, ss.1276-1294, 2008 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 25 Sayı: 6
  • Basım Tarihi: 2008
  • Doi Numarası: 10.1016/j.econmod.2008.04.006
  • Dergi Adı: ECONOMIC MODELLING
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.1276-1294
  • Orta Doğu Teknik Üniversitesi Adresli: Hayır

Özet

Recent literature on monetary policy analysis extensively uses the sticky price model of price adjustment in a New Keynesian Macroeconomic framework. This price setting model, however. has been criticized for producing implausible results regarding inflation and output dynamics. This paper examines and compares dynamic responses of the sticky price and sticky information models to a cost-push shock in a New Keynesian DSGE framework. It finds that the sticky information model produces more reasonable dynamics through lagged. gradual and hump-shaped responses to a shock as observed in data. However, these responses depend on the persistence of the shock. (C) 2008 Elsevier B.V. All rights reserved.