Rational Inattention in Macroeconomics: A Survey

Yulei Luo () and Eric Young

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we survey recent works on rational inattention (RI) in macroeconomics within the dynamic linear-quadratic-Gaussian (LQG) setting. We first discuss how RI affects consumption smoothness and sensitivity, precautionary savings, asset pricing, portfolio choice, and aggregate fluctuations in the univariate case. We then discuss the applications of RI to macroeconomic models of permanent income and price-setting in the multivariate case. Finally, we briefly discuss how RI can be applied to non-LQG settings.

Keywords: Rational Inattention; Consumption; Asset Pricing; Precautionary Savings; Portfolio Choice; Price Setting. (search for similar items in EconPapers)
JEL-codes: D8 E2 E3 F3 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:54267

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