The Aggregation of Dynamic Relationships caused by Incomplete Information

Michael Alan Thornton

doi:10.1016/j.jeconom.2013.08.032

The Aggregation of Dynamic Relationships caused by Incomplete Information

Michael Alan Thornton

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We consider the aggregation of heterogeneous dynamic equations across a large population, as introduced by Granger (1980), where the dynamics arise because agents face a signal extraction problem caused by incomplete information. This weakens the independence assumptions used previously in the aggregation literature. We show that, under plausible assumptions, the differenced cross-section aggregate shows long term persistence even though every individual micro-series follows a random walk. As an example, estimates of the model's micro-relations are made using U.S. household panel data.

Original language	English
Pages (from-to)	1-10
Journal	Journal of Econometrics
Volume	n/a
Issue number	n/a
Early online date	5 Sept 2013
DOIs	https://doi.org/10.1016/j.jeconom.2013.08.032
Publication status	Published - 2013

Keywords

Incomplete Information; Aggregation of Dynamic Relationships; Long

Access to Document

10.1016/j.jeconom.2013.08.032

http://www.sciencedirect.com/science/article/pii/S0304407613001966

Cite this

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