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Author:Tutino, Antonella 

Journal Article
Inflation is not always and everywhere a monetary phenomenon
Fiscal policy is as significant as, and sometimes more important than, monetary policy in determining the price level and, therefore, the dynamics of inflation.
AUTHORS: Tutino, Antonella; Zarazaga, Carlos E.
DATE: 2014-06

Journal Article
Central bank communication must overcome the public’s limited attention span
It is critical that central bankers have the ability to communicate their monetary policy goals and intentions involving employment and price stability to the public. The task is complicated in an economy that includes many firms and households in an era of information overload.
AUTHORS: Tutino, Antonella
DATE: 2016-05

Journal Article
Survey-based forecasts identify likely inflation outcomes
Professional forecasters generally better predict inflation than household surveys and often outperform nave year-ahead forecasts based on the Fed?s 2 percent target. Constants, the basis of the nave forecasts, benefit because they are not subject to month-to-month volatility.
AUTHORS: Tutino, Antonella
DATE: 2015-08

Journal Article
Consumers Respond More to Negative News than Positive Info
Consumers, forced to navigate a constant stream of economic information, are often challenged to sort through details and respond to new material. Experiments suggest that people react more forcefully to negative income shocks than to positive ones. Size also matters: Reaction to small shocks is slower relative to the response to big shocks participation-rate decline.
AUTHORS: Tutino, Antonella
DATE: 2018-05

Journal Article
Cost of decisionmaking influences individual selections
Market prices are often driven by choices later viewed as mistakes. Waves of optimism or pessimism sometimes dramatically move prices; a burst bubble of euphoria can bring significant macroeconomic consequences. ; A sudden change of sentiment may occur when a large number of stock market professionals consistently err by holding on to stocks for too long when they should sell, or by selling equities too quickly when they should be holding on to them. Yet, these individuals are specialists with every incentive to evaluate stocks correctly. ; Behavioral experiments show that in laboratory conditions, people behave like market participants.[1] When faced with the same question repeatedly within any single experiment, they frequently change their minds. ; Why are people so inconsistent? Do rational people blunder? Theories on how individuals and groups reach decisions don?t provide a satisfactory answer. By and large, the mystery of costly human errors remains unsolved. Understanding why such mistakes occur can help researchers interpret change in observed behavior and carries implications for the behavior of financial markets. ; Weighing the cost of making decisions may provide an answer.[2] A rational person may be willing to err if the cost of making a mistake is less than the cost of a precise and correct evaluation of each option. A rational person balances the gain from a consistently beneficial choice with the cost of paying attention?that is, the cost of being precise. ; Though information is abundant, not all of it is necessary to make a well-informed choice. In attention to some information is a perfectly rational response in these circumstances.
AUTHORS: Cheremukhin, Anton A.; Tutino, Antonella
DATE: 2012

Journal Article
'Rational inattention' guides overloaded brains, helps economists understand market behavior
Between Internet news sources, social media and email, people are awash in information, most of it accessible at near-zero cost. Yet, humans possess only a finite capacity to process all of it. The average email user, for example, receives dozens of messages per day. The messages can?t all receive equal attention. How carefully does someone read an email from a sibling or friend before crafting a reply? How closely does a person read an email from the boss?> ; Limitations on the ability to process information force people to make choices regarding the subjects to which they pay more or less attention. Economists have long acknowledged the existence of human cognitive capacities, but only in recent years have models embodying such limits known as ?rational inattention? found their way into mainstream macroeconomics.> ; Rational inattention models have a broad range of applications. They may reconcile relatively unchanged prices and volatile ones and how the two play out in aggregate demand in the U.S. economy. Moreover, such models can capture salient features of the business cycle, providing a rationale for sharp contractions or slower expansions. Finally, rational inattention models have significant implications for monetary policy. Since the focus of these models revolves around formation of peoples? expectations, understanding how individuals perceive the economy is instrumental to policymakers? efforts to achieve output and price stabilization objectives.
AUTHORS: Tutino, Antonella
DATE: 2011

Working Paper
A theory of targeted search
We present a theory of targeted search, where people with a finite information processing capacity search for a match. Our theory explicitly accounts for both the quantity and the quality of matches. It delivers a unique equilibrium that resides in between the random matching and the directed search outcomes. The equilibrium that emerges from this middle ground is inefficient relative to the constrained Pareto allocation. Our theory encompasses the outcomes of the random matching and the directed search literature as limiting cases.
AUTHORS: Restrepo-Echavarria, Paulina; Tutino, Antonella; Cheremukhin, Anton A.
DATE: 2014-02-13

Working Paper
Rationally inattentive macroeconomic wedges
This paper argues that the solution to a dynamic optimization problem of consumption and labor under finite information-processing capacity can simultaneously explain the intertemporal and intratemporal labor wedges. It presents a partial equilibrium model, where a representative risk adverse consumer chooses information about wealth with limited attention. The paper compares ex-post realizations of models with finite and infinite capacity. The model produces macroeconomic wedges and measures of elasticity consistent with the literature. These findings suggest that a consumption-labor model with information-processing constraints can explain the difference between predicted and observed consumption and employment behavior.
AUTHORS: Tutino, Antonella
DATE: 2010

Working Paper
Asymmetric firm dynamics under rational inattention
We study the link between business failures, markups and business cycle asymmetry in the U.S. economy with a model of optimal firm exit under rational inattention. We show that the model's predictions of lagged, counter-cyclical and positively skewed markups together with counter-cyclical exit rates are consistent with the empirical evidence. Moreover, our model uncovers a new mechanism that links information processing with the business cycle. It predicts counter-cyclical attention to economic conditions consistent with survey evidence.
AUTHORS: Tutino, Antonella; Cheremukhin, Anton A.
DATE: 2014-10-01

Working Paper
Targeted search in matching markets
We propose a parsimonious matching model where people's choice of whom to meet endogenizes the degree of randomness in matching. The analysis highlights the interaction between a productive motive, driven by the surplus attainable in a match, and a strategic motive, driven by reciprocity of interest of potential matches. We find that the interaction between these two motives differs with preferences ? vertical versus horizontal ? and that this interaction implies that preferences estimated using our model can look markedly different from those estimated using a model where the degree of randomness is not endogenous. We illustrate these results using data on the U.S. marriage market and finish by showing that the model can rationalize the finding of aspirational dating.
AUTHORS: Cheremukhin, Anton A.; Restrepo-Echavarria, Paulina; Tutino, Antonella
DATE: 2016-05-20

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