Rational inattention and the business cycle effects of productivity and news shocks

Bartosz Maćkowiak and Mirko Wiederholt

No 2827, Working Paper Series from European Central Bank

Abstract: We solve a real business cycle model with rational inattention (an RI-RBC model). In the RIRBC model, the growth rates of employment, investment, and output are about as persistent as in the data, with an amount of inattention consistent with survey data on expectations. Moreover, consumption, employment, and output move in the same direction in response to news about future productivity. By contrast, the baseline RBC model produces neither persistent growth rates nor business cycle comovement after news shocks. JEL Classification: D83, E32, E71

Keywords: information choice; news shocks; productivity shocks; rational inattention; real business cycle model (search for similar items in EconPapers)
Date: 2023-07
New Economics Papers: this item is included in nep-dge and nep-upt
Note: 1026376
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Rational Inattention and the Business Cycle Effects of Productivity and News Shocks (2025)
Working Paper: Rational Inattention and the Business Cycle Effects of Productivity and News Shocks (2022)
Working Paper: Rational Inattention and the Business Cycle Effects of Productivity and News Shocks (2021)
Working Paper: Rational Inattention and the Business Cycle Effects of Productivity and News Shocks (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20232827

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