Indeterminacy and Imperfect Information

Elmar Mertens, Christian Matthes and Thomas Lubik
Additional contact information
Thomas Lubik: Federal Reserve Bank of Richmond

No 337, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: We study equilibrium determination in an environment where two kinds of agents have different information sets: The fully informed agents know the structure of the model and observe histories of all exogenous and endogenous variables. The less in-formed agents observe only a strict subset of the full information set. All types of agents form expectations rationally, but agents with limited information need to solve a dynamic signal extraction problem to gather information about the variables they do not observe. We show that for parameters values that imply a unique equilibrium under full information, the limited information rational expectations equilibrium can be indeterminate. In a simple application of our framework to a monetary policy problem we show that limited information on part of the central bank implies indeterminate outcomes even when the Taylor Principle holds.

Date: 2017
New Economics Papers: this item is included in nep-dge, nep-mic and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2017/paper_337.pdf (application/pdf)

Related works:
Journal Article: Indeterminacy and Imperfect Information (2023)
Working Paper: Indeterminacy and imperfect information (2020)
Working Paper: Indeterminacy and Imperfect Information (2019)
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:red:sed017:337

Access Statistics for this paper

More papers in 2017 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().