On the social cost of transparency in monetary economies
AbstractI 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 InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2010-001.
Date of creation: 2010
Date of revision:
Other versions of this item:
- Federal Reserve Bank of St. Louis & David Andolfatto, 2010. "On the Social Cost of Transparency in Monetary Economies," 2010 Meeting Papers 980, Society for Economic Dynamics.
- NEP-ALL-2010-01-16 (All new papers)
- NEP-CBA-2010-01-16 (Central Banking)
- NEP-MAC-2010-01-16 (Macroeconomics)
- NEP-MON-2010-01-16 (Monetary Economics)
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- Guillermo Ordonez & Gary Gorton, 2011.
2011 Meeting Papers
569, Society for Economic Dynamics.
- David Andolfatto & Aleksander Berentsen & Christopher J. Waller, 2012.
"Optimal disclosure policy and undue diligence,"
2012-001, Federal Reserve Bank of St. Louis.
- Williamson, Stephen & Wright, Randall, 2010.
"New Monetarist Economics: Models,"
Handbook of Monetary Economics,
in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 2, pages 25-96
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