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Macroeconomic Dynamics under Rational Inattention

Author

Listed:
  • Bartosz Mackowiak

    (Humboldt University Berlin)

  • Mirko Wiederholt

    (Humboldt University Berlin)

Abstract

This 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.

Suggested Citation

  • Bartosz Mackowiak & Mirko Wiederholt, 2006. "Macroeconomic Dynamics under Rational Inattention," Computing in Economics and Finance 2006 443, Society for Computational Economics.
  • Handle: RePEc:sce:scecfa:443
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    File URL: http://repec.org/sce2006/up.27121.1141161429.pdf
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    Cited by:

    1. Guido Lorenzoni, 2009. "A Theory of Demand Shocks," American Economic Review, American Economic Association, vol. 99(5), pages 2050-2084, December.

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