The Aggregation of Dynamic Relationships caused by Incomplete Information

Thursday 31 May 2012, 1.15PM to 2:15pm

Speaker(s): Mike Thornton (University of York)

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.

Location: Economics Staff Room (EC/202)

Admission: For Staff and Postgraduate students