This paper solves the canonical dynamic rational inattention problem of Sims (2003) by formulating it in the frequency domain. The solution complements and extends existing results, which have been derived in the time domain. The paper provides a simple algorithm that quickly and accurately...

Dynamic rational inattention problems used to be difficult to solve. This paper provides simple, analytical results for dynamic rational inattention problems. We start from the benchmark rational inattention problem. An agent tracks a variable of interest that follows a Gaussian process. The...