Abstract
Inflation expectation plays an important role in macro-economy, and the stickiness of information is critical for the management of inflation expectations. This paper tries to provide supportive evidence of sticky-information in forming inflation expectations in three significant economies, i.e., China, Eurozone, and the United States. Based on the epidemiology model, our results show that the stickiness in China is smaller than that in Eurozone and the United States. (JEL: E31, E52, E58, D84)
Highlights
There is a rapidly growing literature on sticky-information, indicating that agents update information occasionally rather than instantaneously
This paper estimates information update frequencies in China, the United States, and Eurozone based on epidemiology model
The estimation of information update frequency benefits the management of inflation persistence and inflation expectations because it is useful in grasp the moment of monetary and fiscal policy and information announcement
Summary
There is a rapidly growing literature on sticky-information, indicating that agents update information occasionally rather than instantaneously. The sticky-information models are proved to be effective in solving some puzzles of inflation and unemployment (e.g. Mankiw and Reis, 2010). The stickiness of information of U.S in forming inflation expectations is estimated for the first time. Dovern and Doepke (2008) extend the epidemiology model to four European economies (France, Germany, Italy, and U.K.) and demonstrate different stickiness. The sticky-information seems to be effective in many countries, corresponding evidence for China is still lacking, and the regional difference of stickiness seems to be insufficiently studied. This paper tries to provide supportive evidence of the heterogeneous sticky-information in three significant economies.
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