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We consider boundedly rational agents who do not plan over the infinite future but make trading plans at a finite, arbitrary horizon. We investigate the role of that horizon in the price dynamics of an asset in a Lucas tree model. We then design a laboratory experiment to test our theoretical...
Persistent link: https://www.econbiz.de/10012037335
This paper addresses the output-price volatility puzzle by studying the interaction of optimal monetary policy and agents' beliefs. We assume that agents choose their information acquisition rate by minimizing a loss function that depends on expected forecast errors and information costs....
Persistent link: https://www.econbiz.de/10014223070
This paper develops an adaptive learning formulation of an extension to the Ball, Mankiw, and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker's preferences for price vs. output stability, the learning...
Persistent link: https://www.econbiz.de/10014223413