efficiency gains can be sizable, but we find that most of the improvements can then attributed to the relaxation of borrowing constraints, rather than the introduction of savings distortions.

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...

the potential heterogeneity in priors.