Template-type: ReDIF-Paper 1.0
Author-Name: Romain Baeriswyl
Author-Name-First: Romain
Author-Name-Last: Baeriswyl
Author-Person: pba446
Author-Name: Pierrick Clerc
Author-Name-First: Pierrick
Author-Name-Last: Clerc
Author-Name: Camille Cornand
Author-Name-First: Camille
Author-Name-Last: Cornand
Author-Person: pco917
Title: Business cycle fluctuations and monetary policy under heterogeneous information: A literature review
Abstract: Modelling business cycle fluctuations and the nonneutrality of money is an ongoing challenge for macroeconomists. While the imperfect-information hypothesis developed by Phelps and Lucas in the 1970s had been abandoned in favour of the sticky-price hypothesis, a recent trend in the literature has put the imperfect-information hypothesis back on the agenda to explain business fluctuations and monetary nonneutrality. The success of this revival lies in the introduction of strategic uncertainty into a framework of heterogeneous information. The present paper presents this macroeconomic framework and provides a brief overview of recent advances in the literature.

Length: 30 pages
Creation-Date: 2025
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2025/working_paper_2025_16
File-Format: text/html
Number: 2025-16
Classification-JEL: C72, D83, E12, E32, E52
Keywords: Heterogeneous information, Strategic complementarities, Higher-order beliefs, Coordination, Beauty-contest, Monetary nonneutrality, Business cycle, Communication policy, Monetary policy
Handle: RePEc:snb:snbwpa:2025-16