Sparse restricted perceptions equilibrium
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11640%2F22%3A00558475" target="_blank" >RIV/00216208:11640/22:00558475 - isvavai.cz</a>
Result on the web
<a href="https://doi.org/10.1016/j.jedc.2022.104415" target="_blank" >https://doi.org/10.1016/j.jedc.2022.104415</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.jedc.2022.104415" target="_blank" >10.1016/j.jedc.2022.104415</a>
Alternative languages
Result language
angličtina
Original language name
Sparse restricted perceptions equilibrium
Original language description
We study model selection under bounded rationality and the impact of monetary policy on the equilibrium choices of forecasting models. We use the concept of sparse rationality (recently developed by Gabaix, 2014 and 2020), where paying attention to all possible variables is costly and agents can choose to under-emphasize particular variables, and may even fully exclude some of them. Our main question is whether an initially mis-specified equilibrium (the restricted perceptions equilibrium, or RPE) is compatible with the equilibrium choice of sparse weights describing the allocation of attention to different variables by the agents inhabiting this RPE. In a simple New Keynesian model, we find that the agents adhere to their initial mis-specified AR(1) forecasting model choice when monetary policy is less aggressive or inflation is more persistent. We also identify a region in the parameter space in which the agents find it advantageous to pay attention to no variables at all.
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
50202 - Applied Economics, Econometrics
Result continuities
Project
<a href="/en/project/GBP402%2F12%2FG097" target="_blank" >GBP402/12/G097: DYME-Dynamic Models in Economics</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)
Others
Publication year
2022
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 Dynamics & Control
ISSN
0165-1889
e-ISSN
1879-1743
Volume of the periodical
139
Issue of the periodical within the volume
June
Country of publishing house
NL - THE KINGDOM OF THE NETHERLANDS
Number of pages
21
Pages from-to
104415
UT code for WoS article
000802869300002
EID of the result in the Scopus database
2-s2.0-85130375470