Rational Inattention in Macroeconomics: A Survey

In this paper we survey recent works on rational inattention (RI) in macroeconomics within the dynamic linear-quadratic-Gaussian (LQG) setting. We first discuss how RI affects consumption smoothness and sensitivity, precautionary savings, asset pricing, portfolio choice, and aggregate fluctuations in the univariate case. We then discuss the applications of RI to macroeconomic models of permanent income and price-setting in the multivariate case. Finally, we briefly discuss how RI can be applied to non-LQG settings.

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Year of publication:	2013
Authors:	Luo, Yulei ; Young, Eric

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Type of publication:	Book / Working Paper
Language:	English
Notes:	Luo, Yulei and Young, Eric (2013): Rational Inattention in Macroeconomics: A Survey.
Classification:	D8 - Information and Uncertainty ; E2 - Consumption, Saving, Production, Employment, and Investment ; E3 - Prices, Business Fluctuations, and Cycles ; F3 - International Finance
Source:	BASE

Persistent link: https://www.econbiz.de/10015241424