%0 Report %1 NBERw8673 %A Woodford, Michael %B Working Paper Series %D 2001 %K common effectiveness imperfect information knowledge macro monetary policy kalman_filter %N 8673 %T Imperfect Common Knowledge and the Effects of Monetary Policy %U http://www.nber.org/papers/w8673 %X This paper reconsiders the Phelps-Lucas hypothesis, according to which temporary real effects of purely nominal disturbances result from imperfect information, but departs from the assumptions of Lucas (1973) in two crucial respects. Due to monopolistically competitive pricing, higher-order expectations are crucial for aggregate inflation dynamics, as argued by Phelps (1983). And decisionmakers' subjective perceptions of current conditions are assumed to be of imperfect precision, owing to finite information processing capacity, as argued by Sims (2001). The model can explain highly persistent real effects of a monetary disturbance, and a delayed effect on inflation, as found in VAR studies.

@techreport{NBERw8673, abstract = {This paper reconsiders the Phelps-Lucas hypothesis, according to which temporary real effects of purely nominal disturbances result from imperfect information, but departs from the assumptions of Lucas (1973) in two crucial respects. Due to monopolistically competitive pricing, higher-order expectations are crucial for aggregate inflation dynamics, as argued by Phelps (1983). And decisionmakers' subjective perceptions of current conditions are assumed to be of imperfect precision, owing to finite information processing capacity, as argued by Sims (2001). The model can explain highly persistent real effects of a monetary disturbance, and a delayed effect on inflation, as found in VAR studies.}, added-at = {2013-03-14T00:39:51.000+0100}, author = {Woodford, Michael}, biburl = {https://www.bibsonomy.org/bibtex/287df4df9153f5044e37edbe894a2423e/jp}, description = {Imperfect Common Knowledge and the Effects of Monetary Policy}, institution = {National Bureau of Economic Research}, interhash = {721deaed5d982ab4c0d921c3f42a3e6a}, intrahash = {87df4df9153f5044e37edbe894a2423e}, keywords = {common effectiveness imperfect information knowledge macro monetary policy kalman_filter}, month = {December}, number = 8673, series = {Working Paper Series}, timestamp = {2013-05-09T03:21:30.000+0200}, title = {Imperfect Common Knowledge and the Effects of Monetary Policy}, type = {Working Paper}, url = {http://www.nber.org/papers/w8673}, year = 2001 }