On the Epidemiological Microfoundations of Sticky Information
11 Pages Posted: 20 Jul 2006
Date Written: May 2006
Abstract
The sticky information setup assumes that information disseminates slowly throughout the population, inducing interesting dynamics in macroeconomic models. Carroll (2003) estimates an epidemiological model of expectations, providing a microfoundation for the sticky information model of Mankiw and Reis (2002). We show that this microfoundation is rather weak. Firstly, it is hard to argue that professional forecasters formed expectations rationally. Second, if we estimate an equation where expectations of households are updated towards rational expectations then the results differ dramatically. Third, by examining the time series of the median household forecaster we manage to invalidate the epidemiological microfoundation of sticky information models.
Keywords: D84, E31
JEL Classification: Inflation, expectations
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Inflation Dynamics: A Structural Econometric Analysis
By Jordi Galí and Mark Gertler
-
Some Evidence on the Importance of Sticky Prices
By Mark Bils and Peter J. Klenow
-
Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve
By N. Gregory Mankiw and Ricardo Reis
-
Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve
By N. Gregory Mankiw and Ricardo Reis
-
By Varadarajan V. Chari, Patrick J. Kehoe, ...
-
Real Rigidities and the Non-Neutrality of Money
By Laurence Ball and David H. Romer
-
By Jordi Galí, Mark Gertler, ...
-
Control of the Public Debt: A Requirement for Price Stability?
