We study how the heterogeneity of information impacts the efficiency of the business cycle and the design of optimal fiscal and monetary policy. We do so within a model that features a standard Dixit-Stiglitz demand structure, introduces dispersed private information about the underlying...

We study how the heterogeneity of information impacts the efficiency of the business cycle and the design of optimal fiscal and monetary policy. We do so within a model that features a standard Dixit-Stiglitz demand structure, introduces dispersed private information about the underlying...

This paper develops a novel theory of the origins of fluctuations. This theory dispenses with the dubious notions of exogenous disturbances to technologies, preferences, or mysterious wedges. Instead, it points out the central role that self-fulfilling expectations can play in shaping short-run...

This paper investigates how incomplete information impacts the response of prices to nominalshocks. Our baseline model is a variant of the Calvo model in which firms observe the underlyingnominal shocks with noise. In this model, the response of prices is pinned down by threeparameters: the...

This paper investigates a real-business-cycle economy that features dispersed informationabout the underlying aggregate productivity shocks, taste shocks, and—potentially—shocks tomonopoly power. We show how the dispersion of information can (i) contribute to significantinertia in the...

Does welfare improve when ?firms are better informed about the state of the economy and can better coordinate their decisions? We address this question in an elementary business-cycle model that highlights how the dispersion of information can be the source of both nominal and real rigidity....

We consider a class of convex, competitive, neoclassical economies in which agents are rational; the equilibrium is unique; there is no room for randomization devices; and there are no shocks to preferences, technologies, endowments, or other fundamentals. In short, we rule out every known source...