Essays on imperfect information, macroeconomic fluctuations, and nominal rigidities

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2010.Cataloged from PDF version of thesis.Includes bibliographical references.The first essay empirically models of aggregate fluctuations with two basic ingredients: agents form anticipations about the future based on noisy sources of information; these anticipations affect spending and output in the short run. Our objective is to separate fluctuations due to actual changes in fundamentals (news) from those due to temporary errors in the private sector's estimates of these fundamentals (noise). Using a simple model where the consumption random walk hypothesis holds exactly, we address some basic methodological issues and take a first pass at the data. First, we show that if the econometrician has no informational advantage over the agents in the model, structural VARs cannot be used to identify news and noise shocks. Next, we develop a structural Maximum Likelihood approach which allows us to identify the model's parameters and to evaluate the role of news and noise shocks. Applied to postwar U.S. data, this approach suggests that noise shocks play an important role in short-run fluctuations. The second essay experimentally examines whether looking at other people's pricing decisions is a type of heuristic, a decision rule that people over-apply even when it is not applicable. such as in the case of clearly private value goods. We find evidence that this is indeed the case. individual valuation of a purely subjective experience under full information, elicited using incentive compatible mechanism, is highly influenced by values of others. As the third essay shows, this result can shed light on price rigidities. Inspired by the experimental results of the second essay, the third essay develops a model of slow macroeconomic adjustment to monetary shocks. The model exploits the idea that buyers are imperfectly informed about their nominal valuation. I proceed in three steps. First, I develop a mechanism for price rigidities. My mechanism captures the notion that firms are reluctant to increase prices after an increase in demand or costs because it creates a disproportionate adverse reaction among consumers. These reactions arise endogenously for purely informational reasons. The key assumption is that some consumers are better informed than others about monetary shocks. If few consumers are informed, equilibria with nominal rigidity exist. In these equilibria firms do not change prices even though they are arbitrarily well informed, and have no menu costs. Moreover, if the proportion of informed consumers is low enough, these equilibria dominate equilibria with flexible prices. Second, I show that when firms do not change prices they inflict an informational externality on other firms. Consumers buy goods sequentially, one after the other, and change their beliefs about shocks when they see prices change. Therefore, when firms do not change prices, consumers do not learn. This hurts both firms and consumers. Third, I study the dynamic responses of output and inflation to shocks. Because of the informational externality learning is initially slow, the responses are delayed and hump-shaped. The responses are also asymmetric - prices increase faster than they decrease, and therefore negative shocks trigger larger output responses than positive shocks.by Jean-Paul L'Huillier.Ph.D

News, noise, and fluctuations : an empirical exploration

May 20, 200

News, Noise, and Fluctuations: An Empirical Exploration

We explore empirically models of aggregate fluctuations with two basic ingredients: agents form anticipations about the future based on noisy sources of information; these anticipations affect spending and output in the short run. Our objective is to separate fluctuations due to actual changes in fundamentals (news) from those due to temporary errors in the private sector's estimates of these fundamentals (noise). Using a simple model where the consumption random walk hypothesis holds exactly, we address some basic methodological issues and take a first pass at the data. First, we show that if the econometrician has no informational advantage over the agents in the model, structural VARs cannot be used to identify news and noise shocks. Next, we develop a structural Maximum Likelihood approach which allows us to identify the model's parameters and to evaluate the role of news and noise shocks. Applied to postwar U.S. data, this approach suggests that noise shocks play an important role in short-run fluctuations.

News, Noise, and Fluctuations: An Empirical Exploration

We explore empirically models of aggregate fluctuations with two basic ingredients: agents form anticipations about the future based on noisy sources of information and these anticipations affect spending and output in the short run. Our objective is to separate fluctuations due to actual changes in fundamentals (news) from those due to temporary errors in agents' estimates of these fundamentals (noise). We use a simple forward-looking model of consumption to address some methodological issues: structural VARs cannot be used to identify news and noise shocks in the data, but identification is possible via a method of moments or maximum likelihood. Next, we use U.S. data to estimate both our simple model and a richer DSGE model with the same information structure. Our estimates suggest that noise shocks play an important role in short-run consumption fluctuations

Inflation and Dark Energy from spectroscopy at z > 2

The expansion of the Universe is understood to have accelerated during two epochs: in its very first moments during a period of Inflation and much more recently, at z < 1, when Dark Energy is hypothesized to drive cosmic acceleration. The undiscovered mechanisms behind these two epochs represent some of the most important open problems in fundamental physics. The large cosmological volume at 2 < z < 5, together with the ability to efficiently target high-$z$ galaxies with known techniques, enables large gains in the study of Inflation and Dark Energy. A future spectroscopic survey can test the Gaussianity of the initial conditions up to a factor of ~50 better than our current bounds, crossing the crucial theoretical threshold of $\sigma(f_{NL}^{\rm local})$ of order unity that separates single field and multi-field models. Simultaneously, it can measure the fraction of Dark Energy at the percent level up to $z = 5$, thus serving as an unprecedented test of the standard model and opening up a tremendous discovery space

Utility of Cardiac Magnetic Resonance to assess association between admission hyperglycemia and myocardial damage in patients with reperfused ST-Segment Elevation Myocardial Infarction

International audienceAbstract: Aims: to investigate the association between admission hyperglycemia and myocardial damage in patients with ST-segment elevation myocardial infarction (STEMI) using Cardiac Magnetic Resonance (CMR). Methods: We analyzed 113 patients with STEMI treated with successful primary percutaneous coronary intervention. Admission hyperglycemia was defined as a glucose level >= 7.8 mmol/l. Contrast-enhanced CMR was performed between 3 and 7 days after reperfusion to evaluate left ventricular function and perfusion data after injection of gadolinium-DTPA. First-pass images (FP), providing assessment of microvascular obstruction and Late Gadolinium Enhanced images (DE), reflecting the extent of infarction, were investigated and the extent of transmural tissue damage was determined by visual scores. Results: Patients with a supramedian FP and DE scores more frequently had left anterior descending culprit artery (p = 0.02 and < 0.001), multivessel disease (p = 0.02 for both) and hyperglycemia (p < 0.001). Moreover, they were characterized by higher levels of HbA(1c) (p = 0.01 and 0.04), peak plasma Creatine Kinase (p < 0.001), left ventricular end-systolic volume (p = 0.005 and < 0.001), and lower left ventricular ejection fraction (p = 0.001 and < 0.001). In a multivariate model, admission hyperglycemia remains independently associated with increased FP and DE scores. Conclusion: Our results show the existence of a strong relationship between glucose metabolism impairment and myocardial damage in patients with STEMI. Further studies are needed to show if aggressive glucose control improves myocardial perfusion, which could be assessed using CMR

Confidence, fundamentals, and consumption

We offer a structural interpretation of survey measures of consumer confidence. Our approach is based on a simple forward-looking model of consumption. The model decomposes observed consumption uctuations in changes due to fundamentals, and changes due to temporary errors caused by noisy information. Our model-based measure, estimated using national accounts, closely mimics out-of-sample survey data in the U.S. and a majority of European countries. The results provide a theoretical foundation for the use of survey-based consumer confidence indices. In addition, since national accounts are an internationally consistent measure of activity, our structural method provides an alternative and internationally consistent measure of consumer confidence