The quality of public information and the term structure of interest rates
This paper analyzes the term structure of interest rates in an exchange-only Lucas (Econometrica 46:1429–1445, 1978) economy where consumers learn about a stochastic growth rate through observations of the endowment process and an external public signal. We allow for deluded consumers, who exaggerate the degree of covariation between the external public signal and the growth rate. With such consum
