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Rational inattention

Author

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  • Bartosz Maćkowiak

Abstract

In the wake of the financial crisis, the standard rational expectations approach to macroeconomics has been criticised because of its strong assumption that agents are able to process any amount of information quickly and without error. “Rational inattention” is an alternative approach to expectations formation which acknowledges limits to agents’ ability to process information. Models with rational inattention yield new insights concerning business cycles and monetary policy. JEL Classification: E3, E5

Suggested Citation

  • Bartosz Maćkowiak, 2011. "Rational inattention," Research Bulletin, European Central Bank, vol. 12, pages 12-15.
    • Handle: RePEc:ecb:ecbrbu:2011:0012:3
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    File URL: http://www.ecb.europa.eu/pub/pdf/other/researchbulletin12en.pdf
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    Citations

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    Cited by:

    1. Kristoffer P. Nimark, 2014. "Man-Bites-Dog Business Cycles," American Economic Review, American Economic Association, vol. 104(8), pages 2320-2367, August.
    2. Mojon, Benoît & Altissimo, Filippo & Zaffaroni, Paolo, 2007. "Fast micro and slow macro: can aggregation explain the persistence of inflation?," Working Paper Series 729, European Central Bank.

    More about this item

    Keywords

    rational inattention;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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