Imperfect information and the business cycle

Monetary Business Cycle Models: Imperfect Information∗

Business cycle theories based on incomplete information start from the premise that key economic decisions on pricing, investment or production are often made on the basis of incomplete knowledge of constantly changing aggregate economic conditions. As a result, decisions tend to respond slowly to changes in economic fundamentals, and small or temporary economic shocks may have large and long-l...

Information, Expectations, and the Business Cycle

I investigate the ability of a noisy rational expectations model to generate plausible macroeconomic dynamics. The model allows for imperfect, heterogeneous information, and signal extraction from endogenous variables. Aggregate shocks are not directly observable. Instead, private agents and the central bank form inferences about aggregate shocks based on their observations of endogenous variab...

Business Cycle Features In The Iranian Economy

Bank Lending Behaviour over the Business Cycle in Iran

This paper studies bank loans over the business cycles in Iran to determine the role of Iranian banks in stabilizing credit. By estimating the long-run relations using dynamic OLS and fully modified OLS estimators, the findings show that real bank lending is positively related to real GDP in the long-run providing evidences of the pro-cyclicality of bank lending in Iran. Hence, Iranian banking ...

Analysis of the Relationship between the Business Cycle and Inflation Gap in Time-Frequency Domain

Controlling the business cycle and minimizing the inflation gap are considered as two major goals for monetary policy. Hence, the policymaker will be able to make more decisive decisions with an awareness of the dynamic relationship and causal relationship between these two variables. Accordingly, the present study uses a discrete and continuous wavelet transform to provide a new understanding ...