The sticky information approach suggests that the origin of the pervasive slow adjustment in the data may be different from the sources highlighted in the New Keynesian literature.
In an influential pair of papers, “Inattentive Producers” and “Inattentive Consumers”, Ricardo studied the decisions of agents who face the costs of acquiring, absorbing and processing information.7 Such agents rationally choose to be inattentive to news, only sporadically updating their information. The optimal frequency of updates, or the length of inattentiveness, depends on features of the economy such as the variance of shocks.