Dispersed Information over the Business Cycle : Optimal Fiscal and Monetary Policy ∗

@inproceedings{Angeletos2010DispersedIO,
  title={Dispersed Information over the Business Cycle : Optimal Fiscal and Monetary Policy ∗},
  author={George-Marios Angeletos},
  year={2010}
}
We study how the heterogeneity of information impacts the effi ciency of the business cycle and the design of optimal fiscal and monetary policy. We do so within a model that features a standard Dixit-Stiglitz demand structure, introduces dispersed private information about the underlying aggregate productivity shock, and allows this information to be imperfectly aggregated through certain prices and macroeconomic indicators. Our key findings are the following: (i)When information is exogenous… CONTINUE READING
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