We provide a microfounded account of imperfect information in a dynamic general equilibrium model by describing heterogeneous households that acquire information only through their participation in markets. Thus incomplete markets will imply incomplete information. We solve the model taking full...

Using a standard dynamic general equilibrium model, we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long-run effects on real variables.

Using a standard dynamic general equilibrium model, we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long-run effects on real variables.