InfoMacro

Information Heterogeneity and Frictions in the Macroeconomy

ERC grant n° 263790

Résumé (en anglais)

The objective of the research is to propose unified treatment of the effects of dispersed information for fluctuations in asset markets and the real economy. The premise that different economic agents have access to different information sources, and hence hold different views about economics conditions, and moreover that they are aware of these differences and take them into considerations in their economic decisions seems simple enough, yet remarkably difficult to integrate with a fully developed model of fluctuations in asset markets or the aggregate economy.

The main hurdle to overcome in integrating informational frictions into a completely specified macroeconomic model results from the fact such a model gives rise to an infinite regress problem that eliminates the ability to represent economic dynamics using recursive methods on a finite-dimensional state space. Models that overcome this problem tend to remain rather stylized and far removed from any empirical implementation.

This research proposes methods to overcome these technical issues and bridge this gap between theoretical insights and quantitative evolution. It then proposes to apply these methods to economic models of asset markets and the macro-economy, with a specific view towards exploring from a theoretical, as well as a quantitative angle the effects of dispersion in beliefs on economic decisions and aggregate outcomes. This analysis will also integrate our work on information heterogeneity with other frictions affecting individual decision at a micro level.
 

Project dates: 01/10/2010 – 30/09/2015

TSE contact: Christian HELLWIG