Information Choice in Macroeconomics and Finance

Information choice is a new research frontier in economics and finance that seeks to explain why economic players know what they know and how the information they have affects collective outcomes. This textbook introduces graduate students to this important research area and illustrates how it is used to answer questions in monetary economics, portfolio choice theory, business cycle theory, international finance, asset pricing, and other areas. It also teaches how to build and test applied theory models with information frictions and covers recent work on rational inattention, information markets, and strategic games with heterogeneous information.

Format: Paperback / softback
Length: 184 pages
Publication date: 07 March 2023
Publisher: Princeton University Press

The study of information choice is a fascinating frontier of research in economics and finance, delving into the depths of human knowledge and decision-making processes. Most theories in these fields assume that individuals possess a certain level of knowledge about their surroundings, but what exactly do they know? This is where the study of information choice comes into play, seeking to answer the question of why economic players know what they know and how the information they possess affects collective outcomes. Instead of making assumptions about what people do or don't know, information choice takes a different approach. It asks the fundamental question: What would people choose to know? By understanding these choices, it becomes possible to predict what individuals would choose to do given the available information.

In this authoritative graduate textbook, Laura Veldkamp takes students on a journey into the world of information choice. The book begins by introducing the concept of information frictions, which are the barriers that prevent individuals from obtaining all the information they desire. It then explores how information choice can be used to address these frictions and improve decision-making. Throughout the textbook, Veldkamp employs real-world examples and case studies to illustrate the practical applications of information choice. She demonstrates how it can be used to analyze monetary economics, portfolio choice theory, business cycle theory, international finance, asset pricing, and other areas.

One of the key strengths of the book is its ability to build and test applied theory models with information frictions. Veldkamp provides students with a step-by-step guide on how to construct these models, using a variety of analytical tools and techniques. She also emphasizes the importance of empirical testing, using real-world data to validate the predictions of the models. This approach not only enhances the credibility of the research but also allows students to apply their knowledge in practical settings.

In addition to its theoretical insights, information choice also sheds light on recent developments in the field. Veldkamp discusses topics such as rational inattention, information markets, and strategic games with heterogeneous information. These topics are of utmost importance in today's complex and interconnected world, where individuals are constantly bombarded with information from various sources. By exploring these topics, the book provides students with a comprehensive understanding of the challenges and opportunities that arise in the realm of information choice.

In conclusion, the study of information choice is a crucial area of research in economics and finance. This authoritative textbook by Laura Veldkamp provides students with a comprehensive and up-to-date introduction to the field. By exploring the concept of information frictions, building and testing applied theory models, and discussing recent developments, the book equips students with the tools they need to excel in this exciting and rapidly evolving field.

Dimension: 235 x 156 (mm)
ISBN-13: 9780691248097