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Information, heterogeneity and market incompleteness Author info | Abstract | Publisher info | Download info | Related research | Statistics Liam Graham
Stephen Wright
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We provide a microfounded account of imperfect information in a dynamic general equilibrium model by describing heterogeneous households that acquire information only through their participation in markets. Thus incomplete markets will imply incomplete information. We solve the model taking full account of the infinite regress of expectations, and show that the properties of the model change dramatically. Under virtually all calibrations the impact response of consumption to a positive aggregate technology shock is negative. If households observe a noisy public signal in addition to the information they obtain from markets, consumption responds to shocks sluggishly
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number
1503.
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Length: 44 pages
Date of creation: Mar 2009Date of revision:
Handle: RePEc:kie:kieliw:1503Contact details of provider: Phone: +49 431 8814-1 Fax: +49 431 85853 Email: Web page: http://www.ifw-kiel.de
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Keywords: imperfect information ; higher order expectations ; Kalman Filter ; dynamic general equilibrium ; Other versions of this item:
Find related papers by JEL classification: D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Brad Baxter & Liam Graham & Stephen Wright, 2007.
"The Endogenous Kalman Filter ,"
Birkbeck Working Papers in Economics and Finance
0719, Birkbeck, Department of Economics, Mathematics & Statistics.
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