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BEGIN:VEVENT
UID:b37b1f08a874a95c3f17b65b38d20f50
CATEGORIES:Seminars
CREATED:20150105T143038
SUMMARY:Thomas Mertens - New York University
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Information Aggregation in DSGE Models\nAbstract:\nWe solve and quantitati
 vely analyze a canonical noisy rational expectations model (Hellwig,1980) w
 ithin the framework of a conventional real business cycle model. Each house
 hold receives a private signal about future productivity. In equilibrium, t
 he stock price serves to aggregate and transmit this information. We find t
 hat dispersed information about future productivity affects the quantitativ
 e properties of our real business cycle model in three dimensions. First, h
 ouseholds’ ability to learn about the future has a large effect on their co
 nsumption-savings decision. The equity premium falls by 87% and the risk-fr
 ee interest rate rises by 100% when the stock price perfectly reveals innov
 ations to future productivity. Second, when noise trader demand shocks limi
 t the stock market’s capacity to aggregate information, households hold het
 erogeneous expectations in equilibrium. However, for a reasonable size of n
 oise trader demand shocks the model cannot generate the kind of disagreemen
 t observed in the data. Third, even moderate heterogeneity in the equilibri
 um expectations held by households affects the correlations and standard de
 viations produced by the model. For example, the correlation between consum
 ption and investment growth is 0.29 when households have no information abo
 ut the future, but 0.41 when information is dispersed.\n
DTSTAMP:20260405T175136Z
DTSTART:20140307T173000Z
DTEND:20140307T190000Z
SEQUENCE:0
TRANSP:OPAQUE
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