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Institutional Affiliation: Federal Reserve Bank of Boston
NBER Working Papers and Publications
|October 2017||Sticky Prices Versus Sticky Information: Does it Matter for Policy Paradoxes?|
with Gauti B. Eggertsson: w23961
This paper shows that government spending multiplier at the zero lower bound (ZLB) is larger under sticky information than under sticky prices. Similarly, well known paradoxes, e.g., the paradox of toil and the paradox of flexibility become more severe under sticky information. For the case of sticky information it is important to assume that the fiscal policy intervention coincides with the duration of zero interest rates, while such distinction is less important in some special cases for sticky prices. This allows us to unify and clarify results that may appear to contradict each other in the literature.
Published: Gauti B. Eggertsson & Vaishali Garga, 2018. "Sticky prices versus sticky information: Does it matter for policy paradoxes?," Review of Economic Dynamics, .