We propose a new measure of the cost of information structures in rational inattention problems, the "neighborhood-based" cost functions, given that many applications involve states with a topological structure. These cost functions summarize the results of a sequential information sampling...

Decisions take time, and the time taken to reach a decision is likely to be informative about the cost of more precise judgments. We formalize this insight in the context of a dynamic rational inattention (RI) model. Under standard conditions on the flow cost of information in our discrete-time...

This paper reconsiders the degree to which macroeconomic stabilization is possible when the zero lower bound is a relevant constraint on the effectiveness of conventional monetary policy, under an assumption of bounded rationality. In particular, we reconsider the potential role of...

In previous work (Eggertsson and Woodford, 2003), we characterized the optimal conduct of monetary policy when a real disturbance causes the natural rate of interest to be temporarily negative, so that the zero lower bound on nominal interest rates binds, and showed that commitment to a...

We consider the consequences for monetary policy of the zero floor for nominal interest rates. The zero bound can be a significant constraint on the ability of a central bank to combat deflation. We show, in the context of an intertemporal equilibrium model, that open-market operations, even of...