Heterogeneous Sticky-Information Economies

25 Pages Posted: 14 Dec 2017

See all articles by Carlos Carvalho

Carlos Carvalho

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics; Kapitalo Investimentos

Date Written: August 1, 2017

Abstract

The literature that emerged from Mankiw and Reis' (2002) proposal of sticky information as an alternative to sticky-price models has focused on economies populated with (ex-ante) identical firms. This paper analyzes the implications of heterogeneity in the degree of information stickiness among price-setting firms in different sectors for the dynamic response of the economy to various shocks. I compare multisector sticky-information models with otherwise identical one-sector economies that feature the same frequency of information updating. I find that the effects of such shocks on the output gap - the difference between actual output and the output level that would prevail in the absence of information frictions - are larger in heterogeneous economies.

Keywords: sticky-information, heterogeneity

JEL Classification: E3

Suggested Citation

Carvalho, Carlos, Heterogeneous Sticky-Information Economies (August 1, 2017). Available at SSRN: https://ssrn.com/abstract=3086347 or http://dx.doi.org/10.2139/ssrn.3086347

Carlos Carvalho (Contact Author)

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22451
Brazil

HOME PAGE: http://https://sites.google.com/site/cvianac2/carloscarvalho

Kapitalo Investimentos ( email )

São Paulo
Brazil

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