Editing Nominal rigidity (section)

===Evaluation of sticky information models===

Sticky information models do not have nominal rigidity: firms or unions are free to choose different prices or wages for each period. It is the information that is sticky, not the prices. Thus when a firm gets lucky and can re-plan its current and future prices, it will choose a trajectory of what it believes will be the optimal prices now and in the future. In general, this will involve setting a different price every period covered by the plan.

This is at odds with the empirical evidence on prices.<ref>{{cite journal |first1=V. V. |last1=Chari |first2=Patrick J. |last2=Kehoe |first3=Ellen R. |last3=McGrattan |year=2008 |url=http://www.minneapolisfed.org/research/sr/sr409.pdf |title=New Keynesian Models: Not Yet Useful for Policy Analysis |journal=Federal Reserve Bank of Minneapolis Research Department Staff Report 409 }}</ref><ref name="Knotec2010">{{cite journal |first=Edward S. II |last=Knotec |year=2010 |title=A Tale of Two Rigidities: Sticky Prices in a Sticky-Information Environment |journal=Journal of Money, Credit and Banking |volume=42 |issue=8 |pages=1543–1564 |doi=10.1111/j.1538-4616.2010.00353.x }}</ref> There are now many studies of price rigidity in different countries: the US,<ref name="KlenowKryvtsov2008" /> the Eurozone,<ref name="Dhyne">{{cite journal |first1=Luis J. |last1=Álvarez |first2=Emmanuel |last2=Dhyne |first3=Marco |last3=Hoeberichts |first4=Claudia |last4=Kwapil |first5=Hervé |last5=Le Bihan |first6=Patrick |last6=Lünnemann |first7=Fernando |last7=Martins |first8=Roberto |last8=Sabbatini |first9=Harald |last9=Stahl |first10=Philip |last10=Vermeulen |first11=Jouko |last11=Vilmunen |year=2006 |title=Sticky Prices in the Euro Area: A Summary of New Micro-Evidence |journal=[[Journal of the European Economic Association]] |volume=4 |issue=2–3 |pages=575–584 |doi=10.1162/jeea.2006.4.2-3.575 |hdl=10419/152997 |s2cid=56011601 |url=http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp563.pdf }}</ref> the UK<ref name=Bunn>{{cite journal |first1=Philip |last1=Bunn |first2=Colin |last2=Ellis |year=2012 |title=Examining The Behaviour Of Individual UK Consumer Prices |journal=[[The Economic Journal]] |volume=122 |issue=558 |pages=F35–F55 |doi=10.1111/j.1468-0297.2011.02490.x |s2cid=153322174 }}</ref> and others. These studies all show that whilst there are some sectors where prices change frequently, there are also other sectors where prices remain fixed over time. The lack of sticky prices in the sticky information model is inconsistent with the behavior of prices in most of the economy. This has led to attempts to formulate a "dual stickiness" model that combines sticky information with sticky prices.<ref name="Knotec2010" /><ref>{{cite journal |first1=Bill |last1=Dupor |first2=Tomiyuki |last2=Kitamura |first3=Takayuki |last3=Tsuruga |title=Integrating Sticky Prices and Sticky Information |journal=[[Review of Economics and Statistics]] |year=2010 |volume=92 |issue=3 |pages=657–669 |doi=10.1162/REST_a_00017 |citeseerx=10.1.1.595.2382 |s2cid=57569783 }}</ref>