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On the social cost of transparency in monetary economies

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  • David Andolfatto

Abstract

I study a class of models commonly used to motivate monetary exchange, extended to include a physical asset whose expected short-run return is subject to exogenous news events, but whose expected long-run return is independent of this information. I show that there are circumstances in which the nondisclosure of news by an asset manager is welfare-improving. When nondisclosure is infeasible, the framework admits a role for government debt. The theory is used to interpret the nondisclosure practices of reputable financial agencies and suggests caveats for legislation designed to promote financial market transparency.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2010-001.

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Date of creation: 2010
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Handle: RePEc:fip:fedlwp:2010-001

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Keywords: Transparency ; Monetary policy;

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Cited by:
  1. Williamson, Stephen D. & Wright, Randall, 2010. "New Monetarist Economics: Models," MPRA Paper 21030, University Library of Munich, Germany.
  2. Guillermo Ordonez & Gary Gorton, 2011. "Collateral Crises," 2011 Meeting Papers 569, Society for Economic Dynamics.
  3. David Andolfatto & Aleksander Berentsen & Christopher Waller, 2011. "Optimal disclosure policy and undue diligence," ECON - Working Papers 045, Department of Economics - University of Zurich.

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