The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Monetary Business Cycles (Imperfect Information)

  • Christian Hellwig
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2250

Abstract

Business cycle theories based on incomplete information start from the premise that key economic decisions on pricing, investment or production are often made on the basis of incomplete knowledge of constantly changing aggregate economic conditions. As a result, decisions tend to respond slowly to changes in economic fundamentals, and small or temporary economic shocks may have large and long-lasting effects on macroeconomic aggregates. This article provides an introductory overview of incomplete information-based theories of business cycles, from their origins to the most recent theoretical developments.

Keywords

Common information Forecasting the forecasts of others Heterogeneity in beliefs Higher-order expectations Higher-order uncertainty Imperfect common knowledge Imperfect information Information aggregation Informational frictions Law of iterated expectations Local markets Menu cost Monetary business cycle models Monetary shocks Monopolistic competition New Keynesian economics Pricing complementarities Rational expectations Rational inattention Real rigidities Sticky prices 

JEL Classifications

D4 D10 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Christian Hellwig
    • 1
  1. 1.