Growth Forecasts, Belief Manipulation and Capital Markets
AbstractWe analyze how a benevolent, privately-informed government agency would optimally release information about the economy's growth rate when the agents hold heterogeneous beliefs. We model two types of agents: "trusting" and "distrustful." The former has a prior that is identical to that of the government agency, whereas the latter has a prior that differs from that of the government agency. We identify both "revealing" and "nonrevealing" equilibria and demonstrate that the "nonrevealing" equilibria can dominate the "revealing" equilibria in terms of ex-post social welfare.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Lund University, Department of Economics in its series Working Papers with number 2010:8.
Length: 39 pages
Date of creation: 31 Jul 2010
Date of revision: 30 May 2012
Contact details of provider:
Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
More information through EDIRC
Social welfare; information; forecasting; asset pricing; heterogeneous beliefs;
Other versions of this item:
- Lundtofte, Frederik & Leoni, Patrick, 2013. "Growth Forecasts, Belief Manipulation and Capital Markets," Knut Wicksell Working Paper Series 2013/15, Knut Wicksell Centre for Financial Studies, Lund University.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-21 (All new papers)
- NEP-CBA-2010-08-21 (Central Banking)
- NEP-CTA-2010-08-21 (Contract Theory & Applications)
- NEP-FOR-2010-08-21 (Forecasting)
- NEP-REG-2010-08-21 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stijn Van Nieuwerburgh & Laura Veldkamp, 2009.
"Information Immobility and the Home Bias Puzzle,"
Journal of Finance,
American Finance Association, vol. 64(3), pages 1187-1215, 06.
- Laura Veldkamp & Stijn Van Nieuwerburgh, 2004. "Information Immobility and the Home Bias Puzzle," Working Papers 04-32, New York University, Leonard N. Stern School of Business, Department of Economics.
- Stijn Van Nieuwerburgh & Laura Veldkamp, 2007. "Information Immobility and the Home Bias Puzzle," NBER Working Papers 13366, National Bureau of Economic Research, Inc.
- Laura Veldkamp & Stijn Van Nieuwerburgh, 2005. "Information Immobility and the Home Bias Puzzle," 2005 Meeting Papers 78, Society for Economic Dynamics.
- Campbell, Colin M., 2004.
"Blackwell's ordering and public information,"
Journal of Economic Theory,
Elsevier, vol. 114(2), pages 179-197, February.
- Lars Jonung & Martin Larch, 2006.
"Improving fiscal policy in the EU: the case for independent forecasts,"
CEPR & CES & MSH, vol. 21(47), pages 491-534, 07.
- Lars Jonung & Martin Larch, 2004. "Improving fiscal policy in the EU: the case for independent forecasts," European Economy - Economic Papers 210, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
- Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
- Anat R. Admati & Paul Pfleiderer, 2004. "Broadcasting Opinions with an Overconfident Sender," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 467-498, 05.
- Ashiya, Masahiro, 2007. "Forecast accuracy of the Japanese government: Its year-ahead GDP forecast is too optimistic," Japan and the World Economy, Elsevier, vol. 19(1), pages 68-85, January.
- Stein, Jeremy C, 1989. "Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements," American Economic Review, American Economic Association, vol. 79(1), pages 32-42, March.
- Tsuchiya, Yoichi, 2013. "Are government and IMF forecasts useful? An application of a new market-timing test," Economics Letters, Elsevier, vol. 118(1), pages 118-120.
- Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
- Marshall, John M, 1974. "Private Incentives and Public Information," American Economic Review, American Economic Association, vol. 64(3), pages 373-90, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Edgerton).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.