I develop a structural model of inflation by combining two different models of price setting behavior: the sticky price model of the New Keynesian literature and the sticky information model of Mankiw and Reis. In a framework similar to the Calvo model, I assume that there are two types of...

This paper provides a simple epidemiology model where households, when forming their inflation expectations, rationally adopt the past release of inflation with certain probability rather than the forward-looking newspaper forecast as suggested in Carroll [2003, Macroeconomic Expectations of...

We estimate a model that integrates sticky prices and sticky information using Spanish data following Dupor et. al (2008). The model yields three empircal facts: a-) the frequency of price changes (around one year), b-) the firm's report that sticky information is no too important for nominal...

The hybrid New Keynesian Phillips curve has been criticized for lacking a micro-foundation. In this paper, an alternative purely forward-looking model of the Phillips curve is constructed on the basis of a micro-foundation of trend inflation. In addition, another source of output gaps other than...

Inflation as a phenomenon has witnessed remarkable changes starting from mid-eighties of the last century. Inflation rates have become less persistent, less responsive to supply side shocks. In addition, the relative importance of demand pull inflation as one of the major determinants of...

This paper is concerned with univariate noncausal autoregressive models and their potential usefulness in economic applications. In these models, future errors are predictable, indicating that they can be used to empirically approach rational expectations models with nonfundamental solutions. In...

In this paper we prove that (I) inefficient natural level of output (Friedman (1968)), (II) central bank's desire to stabilize output around a level that is higher than the inefficient natural level of output, (III) long-run Phillips curve trade-off, and (IV) inflation persistence result in...

This paper is concerned with univariate noncausal autoregressive models and their potential usefulness in economic applications. We argue that noncausal autoregressive models are especially well suited for modeling expectations. Unlike conventional causal autoregressive models, they explicitly...

Recently, it has been argued that trend inflation may be the solution to the puzzle of inflation persistence in the New Keynesian Phillips curve (NKPC). However, incorporating trend inflation into the NKPC raises another serious problem—it lacks a microfoundation. The paper presents a...

The local level model with stochastic volatility, recently proposed for U.S. by Stock and Watson (Why Has U.S. Inflation Become Harder to Forecast?, Journal of Money, Credit and Banking, Supplement to Vol. 39, No. 1, February 2007), provides a simple yet sufficently rich framework for...