ECON 7335 Information, Learning and Expectations In Macro

PhD Course, Economics Department, Cornell University, Spring 2018

Tuesdays and Thursdays 8:40-9:55 (URH488)

Final: TBA

Overview

Many economic decisions are made with only partial and imperfect information about variables relevant to agents' pay offs. This course equips students with some of the tools needed to model build and solve models that deviate from full information rational expectations. The course covers many of the seminal papers in the literature and substantive results from the literature will be discussed along with the specific methods and techniques needed to derive them. Lecture notes will be provided, but reading articles will also be required.


Syllabus

Sample Midterm
Instructions and paper suggestions for report

Lecture 1 Overview and some basics
Lecture Notes Basics

Lecture 2 The Kalman Filter
Lecture notes on the Kalman Filter

Lecture 3 Island Models
Lecture Notes on Lucas Island model
A theory of demand shocks, Lorenzoni, AER 2009

Lecture 4 Private and Public Information
Lecture Notes Private and Public Information
Social Value of Public Information, Morris and Shin, AER (2002)
Social Value of Public Information: Comment: Morris and Shin (2002) is actually pro transparencey, not con, Svensson, AER (2006)
Social Value of Public Information: Comment: Morris and Shin (2002) is actually pro transparencey, not con: A Reply, Morris, Shin and Tong, AER (2006)

Lecture 5 Private Information and Asset Pricing
Admati (1985)
Lecture Notes on Private Information and Asset Pricing in the CARA normal model

Lecture 6 The Information Revealed by Prices
Lecture Notes on The Information Revealed by Prices
On the efficiency of competitive stock markets where traders have diverse information, Grossman, JoF (1975)
On the impossibility of informationally efficient markets, Grossman and Stiglitz, AER (1980)

Lecture 7 Social Learning
Ch 3-4 in Rational Herds, Christophe Chamley, Cambridge University Press
How Fast do Rational Agents Learn?, Vives, REStud (1993)

Lecture 8 Information theory
Ch 2 and 5 in Information Science, David Luenberger, Princeton University Press
Lecture notes on Information Theory

Lecture 9 Endogenous Information Choice
Rational Inattention, Palgrave entry by Wiederholt
Information Immobility and the Home Bias Puzzle, by van Nieuwerburgh and Veldkamp, JoF (2008)
Optimal Sticky Prices under Rational Inattention, Mackowiak and Wiederholt, AER (2009)
Slides

Lecture 10 News media coverage and beliefs
News Media and Delegated Information Choice by Nimark and Pitschner, WP 2017
Slides

Lecture 11 Bayesian Persuasion
Bayesian Persuasion, Gentzkow and Kamenica, AER (2011)

Lecture 12 Empirical Implications of Information Imperfections
Information, animal spirits, and the meaning of innovations in consumer confidence, Barsky and Sims, AER (2012)
News, Noise, and Fluctuations: An Empirical Exploration, Blanchard, L'Huillier and Lorenzoni, AER (2013)
Growth Expectations, Undue Optimism, and Short-run Fluctuations, Enders, Kleemann and Mueller (2013)
Speculation and the Bond Market: An Empirical No-arbitrage Framework, Barillas and Nimark (2014)
Slides