Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130679
Authors: 
Veracierto, Marcelo
Year of Publication: 
2014
Series/Report no.: 
Working Paper, Federal Reserve Bank of Chicago 2014-10
Abstract: 
I consider a real business cycle model in which agents have private information about an idiosyncratic shock to their value of leisure. I consider the mechanism design problem for this economy and describe a computational method to solve it. This is an important contribution of the paper since the method could be used to solve a wide class of models with heterogeneous agents and aggregate uncertainty. Calibrating the model to U.S. data I find a striking result: That the information frictions that plague the economy have no effects on business cycle fluctuations.
Subjects: 
adverse selection
risk sharing
business cycles
private information
incentives
optimal contracts
computational methods
heterogeneous agents
JEL: 
C63
C68
D31
D82
E32
Document Type: 
Working Paper

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