Learning over the business cycle: Policy implications

George-Marios Angeletos, Luigi Iovino and Jennifer La'O

Journal of Economic Theory, 2020, vol. 190, issue C

Abstract: This paper studies the policy implications of the endogeneity of information about the state of the economy. The business cycle can be made less noisy, and more efficient, by incentivizing firms to vary their pricing and production decisions more with their beliefs about the state of the economy. This calls for countercyclical taxes complemented by a monetary policy that “leans against the wind.” The optimal policies trade-off allocative efficiency for informational efficiency.

Keywords: Informational frictions; Learning; Business cycles (search for similar items in EconPapers)
JEL-codes: D61 D62 D82 D83 E32 E52 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:190:y:2020:i:c:s0022053120301083

DOI: 10.1016/j.jet.2020.105115

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