Multivariate Rational Inattention

Jianjun Miao, Jieran Wu and Eric Young

Econometrica, 2022, vol. 90, issue 2, 907-945

Abstract: We study optimal control problems in the multivariate linear‐quadratic‐Gaussian framework under rational inattention. We propose a three‐step procedure to solve this problem using semidefinite programming and derive the optimal signal structure without strong prior restrictions. We analyze both the transition dynamics of the optimal posterior covariance matrix and its steady state. We characterize the optimal information structure for some special cases and develop numerical algorithms for general cases. Applying our methods to solve three multivariate economic models, we obtain some results qualitatively different from the literature.

Date: 2022
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Citations: View citations in EconPapers (6)

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https://doi.org/10.3982/ECTA18086

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Working Paper: Multivariate Rational Inattention (2019)
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