Business Cycle Dynamics under Rational Inattention∗
نویسندگان
چکیده
This paper studies a dynamic stochastic general equilibrium model with rational inattention. Decisionmakers have limited attention and choose the optimal allocation of their attention. We study the implications of rational inattention for business cycle dynamics. For example, we study how rational inattention affects impulse responses of prices and quantities to monetary policy shocks, aggregate technology shocks and micro-level shocks. ∗We thank Paco Buera, Christian Hellwig and Giorgio Primiceri as well as seminar and conference participants at the European Central Bank, the European University Institute and the North American Winter Meeting of the Econometric Society 2008 for helpful comments. E-mail: [email protected] and [email protected].
منابع مشابه
Business Cycle Amplification with Heterogeneous Expectations
This paper studies the implications for business cycle dynamics of heterogeneous expectations in a stochastic growth model. The assumption of homogeneous, rational expectations is replaced with a heterogeneous expectations model where a fraction of agents hold rational expectations and the remaining fraction adopt parsimonious forecasting models that are, in equilibrium, optimal within a restri...
متن کاملDynamics of higher order rational difference equation $x_{n+1}=(alpha+beta x_{n})/(A + Bx_{n}+ Cx_{n-k})$
The main goal of this paper is to investigate the periodic character, invariant intervals, oscillation and global stability and other new results of all positive solutions of the equation$$x_{n+1}=frac{alpha+beta x_{n}}{A + Bx_{n}+ Cx_{n-k}},~~ n=0,1,2,ldots,$$where the parameters $alpha$, $beta$, $A$, $B$ and $C$ are positive, and the initial conditions $x_{-k},x_{-k+1},ldots,x_{-1},x_{0}$ are...
متن کاملMaking Sense of Ignoring Cents: Price Points and Price Rigidity under Rational Inattention
We explore the relationship between price points and price rigidity using two datasets. One is a large weekly transaction price data set, covering 29 product categories over an eight-year period from a large Midwestern United States supermarket chain. The other comes from the Internet and includes daily prices over a two-year period for a variety of consumer electronic products with a wide rang...
متن کاملRational inattention and the dynamics of consumption and wealth in general equilibrium
This paper derives the general equilibrium effects of rational inattention (or RI; Sims 2003, 2010) in a model of incomplete income insurance (Huggett 1993, Wang 2003). We first show that, under the assumption of CARA utility with Gaussian shocks, the permanent income hypothesis (PIH) arises in steady state equilibrium due to a balancing of precautionary savings and impatience. We explore how t...
متن کاملWhat We Don’t Know Doesn’t Hurt Us: Rational Inattention and the Permanent Income Hypothesis in General Equilibrium
This paper derives the general equilibrium effects of rational inattention (or RI; Sims 2003, 2010) in a model of incomplete income insurance (Huggett 1993, Wang 2003). We show that, under the assumption of CARA utility with Gaussian shocks, the permanent income hypothesis (PIH) arises in steady state equilibrium due to a balancing of precautionary savings and impatience. We then explore how RI...
متن کامل