Information acquisition and learning from prices over the business cycle

Taneli M�kinen () and Bj�rn Ohl ()
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Taneli M�kinen: Bank of Italy
Bj�rn Ohl: Narodowy Bank Polski
Authors registered in the RePEc Author Service: Taneli Mäkinen ()

No 946, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We study firms� incentives to acquire costly information in booms and recessions to understand the role of endogenous information in explaining business cycles. We find that when the economy has been in a recession in the previous period, and firms enter the current period with a pessimistic belief, the incentive to acquire information is stronger than when the economy has been in a boom and firms share an optimistic belief. The cyclicality of the aggregate learning outcome is moderated by the price system, which transmits information from informed to uninformed firms, thus dampening information demand. Though learning from equilibrium prices acts to stabilize fluctuations by discouraging information acquisition, it can be welfare-enhancing to make information prohibitively costly to obtain.

Keywords: information acquisition; rational expectations equilibrium; asymmetric information; strategic substitutability (search for similar items in EconPapers)
JEL-codes: D51 D83 E32 (search for similar items in EconPapers)
Date: 2014-01
New Economics Papers: this item is included in nep-bec, nep-cta and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Information acquisition and learning from prices over the business cycle (2015)
Working Paper: Information acquisition and learning from prices over the business cycle (2014)
Working Paper: Information acquisition and learning from prices over the business cycle (2014)
Working Paper: Information Acquisition and Learning from Prices Over the Business Cycle (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_946_14

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