Price Dispersion, Private Uncertainty, and Endogenous Nominal Rigidities
This paper shows that when agents learn from prices, large private uncertainty may result from a small amount of heterogeneity. As in a Phelps-Lucas island model, final producers look at the prices of their local inputs to infer aggregate conditions. However, market linkages between islands make the...
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| Format: | Report |
| Language: | unknown |
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| Online Access: | https://publications.banque-france.fr/sites/default/files/medias/documents/wp653.pdf |