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Asymmetric Attention

Author

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  • Alexandre Kohlhas

    (Institute for International Economic Studies, Stockholm University)

Abstract

We document simultaneous over- and under-responses to new information by households, firms, and professional forecasters in survey data. Such responses are inconsistent with existing models based on behavioral bias or rational inattention. We demonstrate that a structural, component-based model of information choice can reconcile the disparate facts. We show that optimally chosen, asymmetric attention to different observables can explain the co-existence of over- and under-responses. We then embed our model of information choice into a micro-founded macroeconomic model, which generates expectations consistent with the survey data. We demonstrate that our model creates over-optimistic consumption beliefs in booms and predictability in consumption changes. We confirm auxiliary implications of the model in the data.

Suggested Citation

  • Alexandre Kohlhas, 2018. "Asymmetric Attention," 2018 Meeting Papers 1040, Society for Economic Dynamics.
  • Handle: RePEc:red:sed018:1040
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    File URL: https://economicdynamics.org/meetpapers/2018/paper_1040.pdf
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    References listed on IDEAS

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    Cited by:

    1. Alexandre Kohlhas & Tobias Broer, 2019. "Forecaster (Mis-)Behavior," 2019 Meeting Papers 1171, Society for Economic Dynamics.

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