Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56368
Authors: 
Mäkinen, Taneli
Ohl, Björn
Year of Publication: 
2012
Series/Report no.: 
SSE/EFI Working Paper Series in Economics and Finance 740
Abstract: 
We study firms' incentives to acquire costly information in booms and recessions to understand the role of endogenous information in explaining asymmetric business cycles. When the economy has been in a boom in the previous period, and firms enter the current period with an optimistic belief, the incentive to acquire information is weaker than when the economy has been in a recession and firms share a pessimistic belief. However, the price system, in transmitting information from informed to uninformed firms, moderates asymmetric incentives in information acquisition and renders the aggregate learning outcome approximately acyclical. Our results challenge the prevailing view of procyclical learning as the source of asymmetric business cycles.
Subjects: 
information choice
rational expectations
asymmetric information
Bayesian learning
strategic substitutability
business cycle asymmetries
JEL: 
D51
D82
D83
D84
E39
Document Type: 
Working Paper

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