TY  - JOUR
AU  - Mankiw,N. Gregory
AU  - Reis,Ricardo
TI  - Sticky Information in General Equilibrium
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12605
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12605
L1  - http://www.nber.org/papers/w12605.pdf
N1  - Author contact info:
N. Gregory Mankiw
Department of Economics
Littauer 223
Harvard University
Cambridge, MA  02138
Tel: 617/495-4301
Fax: 617/495-7730
E-Mail: ngmankiw@fas.harvard.edu

Ricardo Reis
Department of Economics, MC 3308
Columbia University
420 West 118th Street, Rm. 1022 IAB
New York  NY  10027
Tel: 212-851-4007
Fax: 212-854-8059
E-Mail: rreis@columbia.edu
AB  - This paper develops and analyzes a general-equilibrium model with sticky information. The only rigidity in goods, labor, and financial markets is that agents are inattentive, sporadically updating their information sets, when setting prices, wages, and consumption. After presenting the ingredients of such a model, the paper develops an algorithm to solve this class of models and uses it to study the model’s dynamic properties. It then estimates the parameters of the model using U.S. data on five key macroeconomic time series. It finds that information stickiness is present in all markets, and is especially pronounced for consumers and workers. Variance decompositions show that monetary policy and aggregate demand shocks account for most of the variance of inflation, output, and hours.
ER  -