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Information rigidities and asymmetric business cycles

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  • Cheremukhin, Anton
  • Tutino, Antonella

Abstract

We study the link between asymmetries of markups and firm exit rates and asymmetries in information acquisition along the U.S. business cycle. We argue that a model of optimal firm exit under rational inattention produces lagged, counter-cyclical and positively skewed markups together with counter-cyclical exit rates, consistent with the empirical evidence. Our model also predicts counter-cyclical information rigidities consistent with survey evidence.

Suggested Citation

  • Cheremukhin, Anton & Tutino, Antonella, 2016. "Information rigidities and asymmetric business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 73(C), pages 142-158.
  • Handle: RePEc:eee:dyncon:v:73:y:2016:i:c:p:142-158
    DOI: 10.1016/j.jedc.2016.09.013
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    References listed on IDEAS

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    Cited by:

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    4. Richard Ashley & Randal Verbrugge, 2019. "Finding a Stable Phillips Curve Relationship: A Persistence-Dependent Regression Mode," Working Papers 19-09R, Federal Reserve Bank of Cleveland, revised 08 Apr 2020.
    5. Braga, Joao Paulo & Semmler, Willi & Grass, Dieter, 2021. "De-risking of green investments through a green bond market – Empirics and a dynamic model," Journal of Economic Dynamics and Control, Elsevier, vol. 131(C).

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    More about this item

    Keywords

    Information; Markups; Exit rates; Rational inattention;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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