Alisdair Mckay

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Individuals must often choose among discrete actions with imperfect information about their payoffs. Before choosing, they have an opportunity to study the payoffs, but doing so is costly. This creates new choices such as the number of and types of questions to ask. We model these situations using the rational inattention approach to information frictions.(More)
Apparently mistaken decisions are ubiquitous. To what extent does this reflect irrationality, as opposed to a rational trade-off between the costs of information acquisition and the expected benefits of learning? We develop a revealed preference test that characterizes all patterns of choice “mistakes” consistent with a general model of optimal costly(More)
Early studies of business cycles argued that contractions in economic activity were briefer (shorter) and more violent (rapid) than expansions. This paper systematically investigates this claim and in the process discovers a robust new business cycle fact: contractions in employment are briefer and more violent than expansions but we cannot reject the null(More)
In recent years, central banks have increasingly turned to “forward guidance” as a central tool of monetary policy, especially as interest rates around the world have hit the zero lower bound. Standard monetary models imply that far future forward guidance is extremely powerful: promises about far future interest rates have huge effects on current economic(More)
This paper addresses the role of non-binding goals to attenuate time inconsistency. Agents have linear reference-dependent preferences and endogenously set a goal that is the reference point. They face an infinite horizon, optimal stopping problem in continuous time, where there exists an option value of waiting due to uncertainty. Goal-setting attenuates(More)
Economists are increasingly interested in how attention impacts behavior, and therefore in models of rational inattention. We characterize choice behaviors associated with a general model of rational inattention. Our model encompasses all those currently in the literature. The necessary and su¢ cient conditions on the data are simple and intuitive. We(More)
Why were people so unprepared for the global financial crisis, the European debt crisis, and the Fukushima nuclear accident? To address this question, we study a model in which agents make state-contingent plans — think about actions in different contingencies — subject to the constraint that agents can process only a limited amount of information. The(More)