Multiple policymakers and the social value of public information
AbstractIn most economies, macroeconomic policy is conducted by two or more independent authorities. In general, each policymaker has a different piece of information about the state of the economy, and this information is different from the one held by the private sector. We extend the model of James and Lawler , of asymmetric and imperfect information, to account for the existence of two independent policymakers. The active policymakers can choose optimally what policy rule to follow, what information to share with the other policymakers, and what information to share with the public. This paper studies the social value of public information when the policymakers are active. We find that improving the quality of the signals transmitted to the private sector can increase the expected value of welfare. If both policymakers seek to maximize expected welfare, full information sharing between authorities achieves higher expected welfare than no information sharing at all.
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Bibliographic InfoPaper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 008981.
Date of creation: 11 Sep 2011
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Macroeconomic Policy; Asymmetric Information; Policy Coordination.;
Other versions of this item:
- Juan David Prada-Sarmiento, . "Multiple policymakers and the social value of public information," Borradores de Economia 670, Banco de la Republica de Colombia.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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- Romain Baeriswyl, 2011. "Endogenous Central Bank Information and the Optimal Degree of Transparency," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 7(2), pages 85-111, June.
- Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1521-1534, December.
- Jonathan G. James & Phillip Lawler, 2011. "Optimal Policy Intervention and the Social Value of Public Information," American Economic Review, American Economic Association, American Economic Association, vol. 101(4), pages 1561-74, June.
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