Bergemann, Dirk; Heumann, Tibor; Morris, Stephen - Cowles Foundation for Research in Economics, Yale University - 2013
In an economy of interacting agents with both idiosyncratic and aggregate shocks, we examine how the structure of … structure in which the agents confound idiosyncratic and aggregate shocks, and display excess response to the aggregate shocks …, as in Lucas [14]. For any given variance of aggregate shocks, the upper bound on aggregate volatility is linearly …