Discussion Paper Details

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Title: Bayesian Learning

Author(s): Isaac Baley and Laura Veldkamp

Publication Date: July 2021

Keyword(s): active learning, Bayes' law, Coordination Games, data economy, Experimentation, Information Choice, passive learning, rational inattention, Signal Extraction and Sticky information

Programme Area(s): Financial Economics, Macroeconomics and Growth and Monetary Economics and Fluctuations

Abstract: We survey work using Bayesian learning in macroeconomics, highlighting common themes and new directions. First, we present many of the common types of learning problems agents face -- signal extraction problems -- and trace out their effects on macro aggregates, in different strategic settings. Then we review different perspectives on how agents get their information. Models differ in their motives for information acquisition and the cost of information, or learning technology. Finally, we survey the growing literature on the data economy, where economic activity generates data and the information in data feeds back to affect economic activity.

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Bibliographic Reference

Baley, I and Veldkamp, L. 2021. 'Bayesian Learning'. London, Centre for Economic Policy Research.