Ruhr Economic Papers
Ruhr Economic Papers #255
Sticky Prices vs. Sticky Information – A Cross-Country Study of Inflation Dynamics
by Christian Bredemeier and Henry Goecke
TU Dortmund, RGS Econ, 04/2011, 37 S./p., 8 Euro, ISBN 978-3-86788-297-2download
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 diff er from the US benchmark.
JEL-Classification: E31, E32, E37
Keywords: Phillips curve; sticky information; sticky prices