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The CNBC Effect: Welfare Effects of Public Information

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Abstract

What are the welfare effects of enhanced dissemination of public information through the media and disclosures by market participants with high public visibility? For instance, is it always desirable to have frequent and timely publications of economic statistics by government agencies and the central bank? We examine the impact of public information in a setting where agents take actions appropriate to the underlying fundamentals, but they also have a coordination motive arising from a strategic complementarity in their actions. When the agents have no private information, greater provision of public information always increases welfare. However, when agents also have access to independent sources of information, the welfare effect of increased public disclosures is ambiguous.

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  • Stephen Morris & Hyun Song Shin, 2001. "The CNBC Effect: Welfare Effects of Public Information," Cowles Foundation Discussion Papers 1312, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1312
    Note: CFP 1066
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    Cited by:

    1. Hortala-Vallve, Rafael, 2005. "On bank disclosure and subordinated debt," LSE Research Online Documents on Economics 28650, London School of Economics and Political Science, LSE Library.
    2. Seth B. Carpenter, 2004. "Transparency and monetary policy: what does the academic literature tell policymakers?," Finance and Economics Discussion Series 2004-35, Board of Governors of the Federal Reserve System (U.S.).
    3. Thomas Schuster, 2003. "Meta-Communication and Market Dynamics. Reflexive Interactions of Financial Markets and the Mass Media," Finance 0307014, University Library of Munich, Germany.

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    More about this item

    Keywords

    Transparency; disclosures; coordination; overreaction to public information;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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