Essays on Information Frictions in Macroeconomics

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I explore the interaction between financial and information frictions when firms set prices under rational inattention. Facing both aggregate monetary policy shock and idiosyncratic productivity shock, firms with binding financial constraint pay weakly more attention to aggregate shock than unconstrained firms due to strategic complementarity. Using recent survey data, I find new cross-sectional facts that are consistent with the model's predictions regarding firm's attention to different Macroeconomic variables. Generally, monetary non-neutrality is decreasing with the fraction of constrained firms. I provide quantitative calibration disciplined by new survey data to show how a rational inattention model with financial heterogeneity can explain the state-dependent effectiveness of monetary policy which is consistent with recent empirical findings. During recession, increasing fraction of constrained firms will lead to less powerful monetary stimulus, which standard rational inattention model can hardly perform.