Optimal policy under uncertainty and rational inattention
- This paper generalizes the theory of policy uncertainty with the new literature on rational inattention. First, the model demonstrates that inattention is dependent on the signal variance and the policy parameter. Second, I discover a novel trade-off showing that a policy instrument mitigates attention. Third, the policy instrument is non-linear and reciprocal to both the size and variance of the signal. The unifying theory creates new implications to economic theory and public policy alike.
| Author of HS Reutlingen | Herzog, Bodo |
|---|---|
| DOI: | https://doi.org/10.1016/j.ribaf.2019.07.002 |
| ISSN: | 0275-5319 |
| Erschienen in: | Research in international business and finance |
| Publisher: | Elsevier |
| Place of publication: | Amsterdam |
| Document Type: | Article |
| Language: | English |
| Year of Publication: | 2019 |
| Tag: | policy uncertainty; rational inattention; trade-off; unifying modelling |
| Volume: | 50 |
| Page Number: | 6 |
| First Page: | 444 |
| Last Page: | 449 |
| DDC classes: | 650 Management |
| Open Access?: | Nein |
