Events

Speaker:

Miss Chenping Yang
Ph.D. Candidate in Economics
Yale University

This paper studies how endogenous information acquisition by households and firms shapes state-dependent shock propagation. A new source of strategic interaction arises from the interdependence of information choices between households and firms. Theoretically, I show in a linear-quadratic-Gaussian framework that strategic motives in information acquisition depend not only on strategic motives in actions, but also on the volatility of underlying shocks. When applied to a standard macroeconomic model, twosided information acquisition by households and firms generates nonmonotonic movements in the slopes of aggregate demand and aggregate supply as volatility varies. Quantitatively, the model is consistent with the time variation in attention and the slopes of aggregate demand and aggregate supply in the U.S. economy, whereas predictions based on one-sided information acquisition contradict the data