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Intersectoral Linkages, Diverse Information, and Aggregate Dynamics

Manoj Atolia () and Ryan Chahrour

Review of Economic Dynamics, 2020, vol. 36, 270-292

Abstract: What are the aggregate consequences of information frictions? We address this question in a multi-sector real business cycle model in which firms learn from market-based information. Theoretically, we present two distinct cases in which the aggregate effects of incomplete information completely disappear: either (i) market-based information reveals sector-level optimal actions, or (ii) market-based information reveals aggregate conditions in the economy. When the model is calibrated to United States' sectoral data, both conditions hold almost exactly and incomplete information has a negligible effect on aggregate dynamics. (Copyright: Elsevier)

Keywords: Imperfect information; Information frictions; Dispersed information; Sectoral linkages; Strategic complementarity; Higher-order expectations (search for similar items in EconPapers)
JEL-codes: D52 D57 D80 E32 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Intersectoral Linkages, Diverse Information, and Aggregate Dynamics (2015) Downloads
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DOI: 10.1016/j.red.2019.10.003

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