Dynamic rational inattention: analytical results
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11640%2F18%3A00490140" target="_blank" >RIV/00216208:11640/18:00490140 - isvavai.cz</a>
Alternative codes found
RIV/67985998:_____/18:00496039
Result on the web
<a href="http://dx.doi.org/10.1016/j.jet.2018.05.001" target="_blank" >http://dx.doi.org/10.1016/j.jet.2018.05.001</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.jet.2018.05.001" target="_blank" >10.1016/j.jet.2018.05.001</a>
Alternative languages
Result language
angličtina
Original language name
Dynamic rational inattention: analytical results
Original language description
This paper presents analytical results for dynamic rational inattention problems as in Sims (2003). The agent tracks an optimal action that follows a Gaussian process. The agent chooses the properties of the signals that he receives, so as to minimize the mean squared difference between his action and the optimal action, subject to a constraint on information flow. We prove that the optimal signal is a one-dimensional signal about the elements of the state vector, which typically has non-zero signal weights on all elements of the state vector. The intuition for these results is that an agent with memory and limited attention wants to learn about the current optimal action and the best predictors of future optimal actions. Hence, in a dynamic economy, rational inattention creates a combination of delay in actions due to noise in the optimal signal and forward-looking actions due to forward-looking information choice. We illustrate these analytical results in a macroeconomic model of price-setting and a business cycle model with news shocks.
Czech name
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Czech description
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Classification
Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50201 - Economic Theory
Result continuities
Project
<a href="/en/project/GA14-30724S" target="_blank" >GA14-30724S: Rational Inattention in Macroeconomics</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)
Others
Publication year
2018
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
Journal of Economic Theory
ISSN
0022-0531
e-ISSN
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Volume of the periodical
176
Issue of the periodical within the volume
July
Country of publishing house
US - UNITED STATES
Number of pages
43
Pages from-to
650-692
UT code for WoS article
000439751500021
EID of the result in the Scopus database
2-s2.0-85046676836