Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve

2002/11/01 by N. Gregory Mankiw, Ricardo Reis · 10 citations
Economics, Econometrics and Finance · #Monetary Policy and Economic Impact #Economic Theory and Policy #Economic theories and models

paper · pdf · doi:10.1162/003355302320935034

openalex publication_date 2002/11/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04

Abstract

This paper examines a model of dynamic price adjustment based on the assumption that information disseminates slowly throughout the population. Compared with the commonly used sticky-price model, this sticky-information model displays three related properties that are more consistent with accepted views about the effects of monetary policy. First, disinflations are always contractionary (although annoimced disinflations are less contractionary than surprise ones). Second, monetary policy shocks have their maximum impact on inflation with a substantial delay. Third, the change in inflation is positively correlated with the level of economic activity.

Citations

• Implications of rational inattention
• Staggered prices in a utility-maximizing framework
• Inside the Black Box: The Credit Channel of Monetary Policy Transmission
• The Quarterly Journal of Economics

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• New Keynesian economics [wikipedia]
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