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Intersectoral Linkages, Diverse Information, and Aggregate Dynamics

Author

Listed:
  • Manoj Atolia

    (Florida State University)

  • Ryan Chahrour

    (Boston College)

Abstract

What are the aggregate consequences of information frictions? We address this question in a multi-sector real business cycle model in which firms learn from market-based information. Theoretically, we present two distinct cases in which the aggregate effects of incomplete information completely disappear: either (i) market-based information reveals sector-level optimal actions, or (ii) market-based information reveals aggregate conditions in the economy. When the model is calibrated to United States' sectoral data, both conditions hold almost exactly and incomplete information has a negligible effect on aggregate dynamics. (Copyright: Elsevier)

Suggested Citation

  • Manoj Atolia & Ryan Chahrour, 2020. "Intersectoral Linkages, Diverse Information, and Aggregate Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 270-292, April.
  • Handle: RePEc:red:issued:18-248
    DOI: 10.1016/j.red.2019.10.003
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    More about this item

    Keywords

    Imperfect information; Information frictions; Dispersed information; Sectoral linkages; Strategic complementarity; Higher-order expectations;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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