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Article: Rational inattention and aggregate fluctuations

TitleRational inattention and aggregate fluctuations
Authors
KeywordsConsumption volatility
Propagation mechanism
Rational inattention
Issue Date2009
PublisherBerkeley Electronic Press. The Journal's web site is located at http://www.bepress.com/bejm/
Citation
B.E. Journal Of Macroeconomics, 2009, v. 9 n. 1, article no. 14 How to Cite?
AbstractThis paper introduces the rational inattention hypothesis (RI) - that agents process information subject to finite channel constraints - into a stochastic growth model with permanent technology shocks. We find that RI raises consumption volatility relative to output by introducing an endogenous demand shock. Furthermore, it is shown that incorporating RI can provide an additional internal propagation mechanism (measured by the impulse response function and the autocorrelation function of output growth) and generate higher variance of forecastable movements in output. However, we find that RI cannot resolve these puzzles in the RBC literature - weak internal propagation and low variance of forecastable movements in output, even with what appears to be a very low capacity channel. © 2009 The Berkeley Electronic Press.
Persistent Identifierhttp://hdl.handle.net/10722/60150
ISSN
2015 Impact Factor: 0.164
2015 SCImago Journal Rankings: 0.205
References

 

DC FieldValueLanguage
dc.contributor.authorLuo, Yen_HK
dc.contributor.authorYoung, ERen_HK
dc.date.accessioned2010-05-31T04:04:49Z-
dc.date.available2010-05-31T04:04:49Z-
dc.date.issued2009en_HK
dc.identifier.citationB.E. Journal Of Macroeconomics, 2009, v. 9 n. 1, article no. 14en_HK
dc.identifier.issn1935-1690en_HK
dc.identifier.urihttp://hdl.handle.net/10722/60150-
dc.description.abstractThis paper introduces the rational inattention hypothesis (RI) - that agents process information subject to finite channel constraints - into a stochastic growth model with permanent technology shocks. We find that RI raises consumption volatility relative to output by introducing an endogenous demand shock. Furthermore, it is shown that incorporating RI can provide an additional internal propagation mechanism (measured by the impulse response function and the autocorrelation function of output growth) and generate higher variance of forecastable movements in output. However, we find that RI cannot resolve these puzzles in the RBC literature - weak internal propagation and low variance of forecastable movements in output, even with what appears to be a very low capacity channel. © 2009 The Berkeley Electronic Press.en_HK
dc.languageengen_HK
dc.publisherBerkeley Electronic Press. The Journal's web site is located at http://www.bepress.com/bejm/en_HK
dc.relation.ispartofB.E. Journal of Macroeconomicsen_HK
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectConsumption volatilityen_HK
dc.subjectPropagation mechanismen_HK
dc.subjectRational inattentionen_HK
dc.titleRational inattention and aggregate fluctuationsen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=1935-1690&volume=9&spage=Article 14&epage=&date=2009&atitle=Rational+Inattention+and+Aggregate+Fluctuationsen_HK
dc.identifier.emailLuo, Y: yluo@econ.hku.hken_HK
dc.identifier.authorityLuo, Y=rp01083en_HK
dc.description.naturepublished_or_final_version-
dc.identifier.scopuseid_2-s2.0-67649184762en_HK
dc.identifier.hkuros155465en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-67649184762&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume9en_HK
dc.identifier.issue1en_HK
dc.identifier.spagearticle no. 14-
dc.identifier.epagearticle no. 14-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridLuo, Y=23767888300en_HK
dc.identifier.scopusauthoridYoung, ER=16744833200en_HK

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