The authors consider the solution of multivariate linear rational expectations models in the presence of heterogeneous information and social interactions. To overcome the 'infinite regress in expectations' problem that arises in the solution of these models, we assume that agents' expectations about the decisions and expectations of other agents are based solely on public information. They show that the resulting solutions satisfy the key postulates of the rational expectations hypothesis, but can nevertheless exhibit dynamic properties quite different from those under homogeneous information. The authors illustrate this by analyzing a model of firms' optimal factor demand decisions. In this model, the presence of information heterogeneity may accentuate the propagation effects of external shocks on firms' factor demands. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 39 (1998) Issue (Month): 4 (November) Pages: 1027-52 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)