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Article: Elastic attention, risk sharing, and international comovements

TitleElastic attention, risk sharing, and international comovements
Authors
Issue Date2017
PublisherElsevier B.V.. The Journal's web site is located at http://www.elsevier.com/locate/jedc
Citation
Journal of Economic Dynamics and Control, 2017, v. 79, p. 1-20 How to Cite?
AbstractIn this paper we examine the effects of elastic information-processing capacity (or elastic attention) proposed in Sims (2010) on international consumption and income correlations in a tractable small open economy (SOE) model with exogenous income processes. We find that in the presence of capital mobility in financial markets, elastic attention due to a fixed information-processing cost lowers the international consumption correlations by generating heterogeneous consumption adjustments to income shocks across countries facing different macroeconomic uncertainty. In addition, we show that elastic attention can improve the model’s predictions for the other key moments of the joint dynamics of consumption and income.
Persistent Identifierhttp://hdl.handle.net/10722/241678

 

DC FieldValueLanguage
dc.contributor.authorLuo, Y-
dc.contributor.authorLI, W-
dc.contributor.authorNie, J-
dc.date.accessioned2017-06-20T01:47:02Z-
dc.date.available2017-06-20T01:47:02Z-
dc.date.issued2017-
dc.identifier.citationJournal of Economic Dynamics and Control, 2017, v. 79, p. 1-20-
dc.identifier.urihttp://hdl.handle.net/10722/241678-
dc.description.abstractIn this paper we examine the effects of elastic information-processing capacity (or elastic attention) proposed in Sims (2010) on international consumption and income correlations in a tractable small open economy (SOE) model with exogenous income processes. We find that in the presence of capital mobility in financial markets, elastic attention due to a fixed information-processing cost lowers the international consumption correlations by generating heterogeneous consumption adjustments to income shocks across countries facing different macroeconomic uncertainty. In addition, we show that elastic attention can improve the model’s predictions for the other key moments of the joint dynamics of consumption and income.-
dc.languageeng-
dc.publisherElsevier B.V.. The Journal's web site is located at http://www.elsevier.com/locate/jedc-
dc.relation.ispartofJournal of Economic Dynamics and Control-
dc.titleElastic attention, risk sharing, and international comovements-
dc.typeArticle-
dc.identifier.emailLuo, Y: yluo@econ.hku.hk-
dc.identifier.authorityLuo, Y=rp01083-
dc.identifier.doi10.1016/j.jedc.2017.03.009-
dc.identifier.hkuros272553-
dc.identifier.volume79-
dc.identifier.spage1-
dc.identifier.epage20-
dc.publisher.placeNetherlands-

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