Macroeconomic Dynamics under Rational Inattention
AbstractThis paper develops a general equilibrium model with Dixit-Stiglitz preferences, monopolistic competition and rational inattention on the side of both households and firms. We show how to solve a general equilibrium model with rational inattention. We use the model to study how rational inattention affects the impulse responses of macroeconomic variables to monetary policy shocks and technology shocks.
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 443.
Date of creation: 04 Jul 2006
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-15 (All new papers)
- NEP-CBA-2006-07-15 (Central Banking)
- NEP-MAC-2006-07-15 (Macroeconomics)
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- Guido Lorenzoni, 2009.
"A Theory of Demand Shocks,"
American Economic Review,
American Economic Association, vol. 99(5), pages 2050-84, December.
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