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Student Name: Romina Kazandjian
Graduate Level: Ph.D.
Field of Study: Economics
Committee Chair: Prof. Simon Sheng
Committee Members: Prof. Evan Kraft, Dr. Tucker McElroy (US Census Bureau), Dr. Jeff Fuhrer (Federal Reserve Bank of Boston)
Date: November 21, 2019
Location: Kreeger 100
Title of Dissertation: Information Rigidity and Economic Uncertainty: A New Theory and Stylized Facts
Abstract: I propose a structural micro-founded sticky-noisy information model with high- and low-uncertainty regimes. Agents first appraise the state of uncertainty and only spend resources to update their predictions if they perceive uncertainty as sufficiently high. Time-varying uncertainty affects expectation formation through two direct channels: 1) the wake-up call effect, which causes agents to pay more attention, increasing their quantity of information; and 2) the wait-and-see effect, which decreases their quality of information and prompts them to put less weight on new noisier information. Using structural estimation of alternative models with information frictions, I find that accounting for the indirect state-dependence channel better explains the observed information rigidity, since it considers the interaction between the two direct effects. A substantial amount of information rigidity is due to inattention, leaving ample room for policymakers to employ frequent, direct, and simple forward guidance to pierce the veil of inattention