socially desirable. I consider an environment with dispersed information and two aggregate shocks: a productivity shock and a … "news shock" which affects aggregate beliefs. Neither the central bank nor individual agents can distinguish the two shocks …

regarding aggregate productivity. The shock to this public signal, or "news shock," has the features of an aggregate demand … shock: it increases output, employment and inflation in the short run and has no effects in the long run. The dynamics of … the economy following an aggregate productivity shock are also affected by the presence of imperfect information: after a …

We develop a model of investment with financial constraints and use it to investigate the relation between investment … between q and investment, relative to the frictionless benchmark. We present a calibrated version of the model, which, due to … this effect, generates realistic correlations between investment, q, and cash flow …