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Dynamic information aggregation: Learning from the past
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DOI：10.1016/j.jmoneco.2023.02.003.png)
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Abstract
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With dispersed information, how much can agents learn from past endogenous aggregates such as prices or output? In a rational-expectations equilibrium, if general equilibrium effects are strong enough, aggregates no longer perfectly reveal underlying fundamen-tals. In this confounding regime, the effects of informational frictions are persistent over time, and the aggregate outcome displays an initial under-reaction followed by a delayed over-reaction relative to its perfect-information counterpart. In a standard New Keynesian model, we show that endogenous information aggregation helps bring the model predic-tions on aggregate forecasts closer to the data.(c) 2023 Elsevier B.V. All rights reserved.
Keywords:
Information aggregation
Dispersed information
Monetary policy
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