Finance and Economics Discussion Series

Kurt F Lewis

Finance and Economics Discussion Series
Format
Paperback
Publisher
Bibliogov
Country
United States
Published
5 February 2013
Pages
24
ISBN
9781288707621

Finance and Economics Discussion Series

Kurt F Lewis

This paper demonstrates the properties of and a solution method for the more general two-period Rational Inattention model of Sims (2006). It is shown that the corresponding optimization problem is convex and can be solved very quickly. This paper also demonstrates a computational tool well-suited to solving Rational Inattention models and further illustrates a critique raised in Sims (2006) regarding Rational Inattention models whose solutions assume parametric formulations rather than solve for their optimally-derived, non-parametric counterparts.

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