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UID:d5ea2858e0ada214a57656952ca9866b
CATEGORIES:Seminars
CREATED:20150105T143033
SUMMARY:Thomas Mertens - New York University
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:<p style="text-align: justify;"><strong>Information Aggregation in DSGE Mod
 els</strong></p><p style="text-align: justify;">Abstract:</p><p style="tex
 t-align: justify;">We solve and quantitatively analyze a canonical noisy ra
 tional expectations model (Hellwig,1980) within the framework of a conventi
 onal real business cycle model. Each household receives a private signal ab
 out future productivity. In equilibrium, the stock price serves to aggregat
 e and transmit this information. We find that dispersed information about f
 uture productivity affects the quantitative properties of our real business
  cycle model in three dimensions. First, households’ ability to learn about
  the future has a large effect on their consumption-savings decision. The e
 quity premium falls by 87% and the risk-free interest rate rises by 100% wh
 en the stock price perfectly reveals innovations to future productivity. Se
 cond, when noise trader demand shocks limit the stock market’s capacity to 
 aggregate information, households hold heterogeneous expectations in equili
 brium. However, for a reasonable size of noise trader demand shocks the mod
 el cannot generate the kind of disagreement observed in the data. Third, ev
 en moderate heterogeneity in the equilibrium expectations held by household
 s affects the correlations and standard deviations produced by the model. F
 or example, the correlation between consumption and investment growth is 0.
 29 when households have no information about the future, but 0.41 when info
 rmation is dispersed.</p>
DTSTAMP:20260405T115903Z
DTSTART:20140307T173000Z
DTEND:20140307T190000Z
SEQUENCE:0
TRANSP:OPAQUE
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