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University of Pennsylvania

monetary policy and beliefs.

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Essays On The Macroeconomics Of Incomplete Information, Leonardo Melosi May 2010

Essays On The Macroeconomics Of Incomplete Information, Leonardo Melosi

Publicly Accessible Penn Dissertations

In the first chapter, I develop and estimate a dynamic general equilibrium model with imperfectly informed firms in the sense of Woodford (2002). The model has two aggregate shocks: a monetary policy shock and a technology shock. Firms observe idiosyncratic noisy signals about these shocks and face strategic complementarities in price setting. In this environment, agents' "forecasting the forecasts of others" can produce realistic dynamics of model variables, with associated highly persistent real effects of monetary shocks and delayed effects of such shocks on inflation. The paper provides a full Bayesian analysis of the model, revealing that it can capture ...