Business cycle fluctuations and monetary policy under heterogeneous information

Romain Baeriswyl (), Pierrick Clerc () and Camille Cornand ()
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Romain Baeriswyl: Banque Nationale Suisse
Pierrick Clerc: HEC Liège, Management School of the University of Liège
Camille Cornand: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique

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Abstract: Modelling business cycle fluctuations and the non-neutrality of money is an ongoing challenge for macroeconomists. While the imperfect-information hypothesis developed by Phelps and Lucas in the 1970s had been abandoned in favour of the sticky-price hypothesis, a recent trend in the literature has put this hypothesis back on the agenda to explain business fluctuations and monetary non-neutrality. The success of this revival lies in the introduction of strategic uncertainty into a framework of heterogeneous information. The current paper presents this macroeconomic framework and provides a brief overview of recent advances in the literature.

Keywords: Heterogeneous information; strategic complementarities; higher-order beliefs; coordination; beauty-contest; monetary non-neutrality; business cycle; communication policy; Monetary policy (search for similar items in EconPapers)
Date: 2025-07-04
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