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The transcript of a panel discussion marking the fiftieth anniversary of John Muth's "Rational Expectations and the Theory of Price Movements" (Econometrica 1961). The panel consists of Michael Lovell, Robert Lucas, Dale Mortensen, Robert Shiller, and Neil Wallace. The discussion is moderated by...
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This paper studies optimal monetary policy under rational inattention: the policy maker optimally chooses her information subject to a processing constraint. Our analytical results emphasize how the policy maker’s information choices shape her expectations and the dynamics of the macroeconomy....
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We analyze differences in consumption and wealth that arise because of different degrees of rationality of households … other fraction possesses less cognitive ability. We identify the rationality bias of boundedly rational agents, defined as a … rationality bias can be decomposed into three individual components: the consumption expectation bias, the real interest rate bias …
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