Information, heterogeneity and market incompleteness

Arbeitspapier

We provide a microfounded account of imperfect information in a dynamic general equilibrium model by describing heterogeneous households that acquire information only through their participation in markets. Thus incomplete markets will imply incomplete information. We solve the model taking full account of the infinite regress of expectations, and show that the properties of the model change dramatically. Under virtually all calibrations the impact response of consumption to a positive aggregate technology shock is negative. If households observe a noisy public signal in addition to the information they obtain from markets, consumption responds to shocks sluggishly.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 1503

Classification and Topics

• Classification: Wirtschaft ; Incomplete Markets ; Expectations; Speculations ; Business Fluctuations; Cycles
• Subject: Imperfect information ; higher order expectations ; Kalman Filter ; dynamic general equilibrium

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Graham, Liam ; Wright, Stephen
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/28331
• Last update: 10.03.2025, 11:42 AM CET