Imperfect Information and the Business Cycle
Fabrice Collard,
Harris Dellas () and
Frank Smets
No 2009-15, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy
Abstract:
Imperfect information has played a prominent role in modern business cycle theory. We assess its importance by estimating the New Keynesian (NK) model under alternative informational assumptions. One version focuses on confusion between temporary and persistent disturbances. Another, on unobserved variation in the inflation target of the central bank. A third on persistent misperceptions of the state of the economy (measurement error). And a fourth assumes perfect information (the standard NK-DSGE version). We find that imperfect information contains considerable explanatory power for business fluctuations. Signal extraction seems to provide a conceptually satisfactory, empirically plausible and quantitatively important business cycle mechanism.
Keywords: New Keynesian model; imperfect information; signal extraction; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)
Downloads: (external link)
https://media.adelaide.edu.au/economics/papers/doc/wp2009-15.pdf (application/pdf)
Related works:
Working Paper: Imperfect information and the business cycle (2010) 
Journal Article: Imperfect information and the business cycle (2009) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2009-15
Access Statistics for this paper
More papers in School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy Contact information at EDIRC.
Bibliographic data for series maintained by Qazi Haque ().