EconPapers    
Economics at your fingertips  
 

Information Flows and Aggregate Persistence

Oleksiy Kryvtsov ()

No 416, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: This paper studies the effect of imperfect information on aggregate output and price dynamics. I argue that imperfect information can lead monetary shocks to have persistent real effects. In the environment with unobserved aggregate (monetary) and real demand shocks, price-setting agents face fixed costs of updating to full information. Between full updating, agents use market prices and quantities to infer the state of the economy. The economy is more informative if (a) the fraction of fully updating agents is high; (b) shocks to the money supply are more volatile than the sector-specific shocks; and (c) the degree of real rigidity is small. I find that the effect of monetary shocks on output and inflation is bigger in economy that is less informative. Dynamics in uninformative economies can be well approximated by the equilibrium where signals convey no information, as in Mankiw and Reis (2002).

Keywords: imperfect information; monetary nonneutrality (search for similar items in EconPapers)
JEL-codes: E10 E31 (search for similar items in EconPapers)
Date: 2005-11-11
References: Add references at CitEc
Citations: Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Information Flows and Aggregate Persistence (2009) Downloads
Working Paper: Information Flows and Aggregate Persistence (2007) Downloads
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:sce:scecf5:416

Access Statistics for this paper

More papers in Computing in Economics and Finance 2005 from Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().

 
Page updated 2019-10-22
Handle: RePEc:sce:scecf5:416