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Pervasive Stickiness

The American economic review, 2006-05, Vol.96 (2), p.164-169 [Peer Reviewed Journal]

Copyright 2006 American Economic Association ;Copyright American Economic Association May 2006 ;ISSN: 0002-8282 ;EISSN: 1944-7981 ;DOI: 10.1257/000282806777211937 ;CODEN: AENRAA

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Title:
Pervasive Stickiness
Author: Gregory Mankiw, N. ; Reis, Ricardo
Subjects: Approximation ; Benchmarking ; Business cycles ; Classical economics ; Classical growth model ; Consumer economics ; Consumption ; Cost control ; Economic activity ; Economic fluctuations ; Economic models ; Expenditures ; Information ; Information Diffusion in Macroeconomics ; Interest rates ; Labor market ; Macroeconomic modeling ; Macroeconomics ; Monetary policy ; Monopolistic competition ; Phillips curve ; Price elasticity ; Productivity ; Real wages ; Standard deviation ; Sticky prices ; Studies ; U.S.A ; Variables ; Wages ; Wages & salaries ; Workers
Is Part Of: The American economic review, 2006-05, Vol.96 (2), p.164-169
Description: This paper explores a macroeconomic model of the business cycle in which stickiness of information is a pervasive feature. Prices, wages, and consumption are all assumed to be set, to some degree, based on outdated information sets. The paper shows that a model with such pervasive stickiness is better at matching some key facts describing economic fluctuations than is either a benchmark classical model without such informational frictions or a model with only a subset of these frictions. Stickiness is not just needed, but must also be pervasive. Fixing the classical model with a series of isolated patches, however, runs the risk of losing the discipline of having a model altogether. Inattentiveness and stickiness of information have the virtue of adding only one new plausible ingredient to the classical benchmark. The results reported in the paper suggest that such a model moves promisingly in the direction of fitting the facts on business cycles.
Publisher: Nashville: American Economic Association
Language: English
Identifier: ISSN: 0002-8282
EISSN: 1944-7981
DOI: 10.1257/000282806777211937
CODEN: AENRAA
Source: ProQuest Central

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Pervasive Stickiness

Copyright 2006 American Economic Association ;Copyright American Economic Association May 2006 ;ISSN: 0002-8282 ;EISSN: 1944-7981 ;DOI: 10.1257/000282806777211937 ;CODEN: AENRAA

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