SSRN Author: Mirko WiederholtMirko Wiederholt SSRN Content
http://www.ssrn.com/author=1026377
http://www.ssrn.com/rss/en-usSat, 04 Feb 2017 03:40:23 GMTeditor@ssrn.com (Editor)Sat, 04 Feb 2017 03:40:23 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0New: The Rational Inattention FilterDynamic rational inattention problems used to be difficult to solve. This paper provides simple, analytical results for dynamic rational inattention problems. We start from the benchmark rational inattention problem. An agent tracks a variable of interest that follows a Gaussian process. The agent chooses how to pay attention to this variable. The agent aims to minimize, say, the mean squared error subject to a constraint on information flow, as in Sims (2003). We prove that if the variable of interest follows an ARMA(p,q) process, the optimal signal is about a linear combination of {Xt,...,Xt-p 1} and {Et,...,Et-q 1}, where Xt denotes the variable of interest and Et denotes its period t innovation. The optimal signal weights can be computed from a simple extension of the Kalman filter: the usual Kalman filter equations in combination with first-order conditions for the optimal signal weights. We provide several analytical results regarding those signal weights. We also prove the ...
http://www.ssrn.com/abstract=2910942
http://www.ssrn.com/1563463.htmlFri, 03 Feb 2017 08:43:12 GMT