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 agent: "conforming" and "dissenting." 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 informative and uninformative equilibria and demonstrate that the uninformative equilibria can dominate the informative ones in terms of ex-post social welfare.
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Bibliographic InfoPaper provided by Knut Wicksell Centre for Financial Studies, Lund University in its series Knut Wicksell Working Paper Series with number 2013/15.
Length: 45 pages
Date of creation: 13 Sep 2013
Date of revision:
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Postal: Knut Wicksell Centre for Financial Studies, Lund University School of Economics and Management, P.O. Box 7080, S-220 07 Lund, Sweden
Phone: +46 46-222 32 61
Fax: +46 46-222 34 06
Web page: http://www.lusem.lu.se/kwc
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Social welfare; information; forecasting; asset pricing; heterogeneous beliefs;
Other versions of this item:
- Lundtofte, Frederik & Leoni, Patrick, 2010. "Growth Forecasts, Belief Manipulation and Capital Markets," Working Papers 2010:8, Lund University, Department of Economics, revised 30 May 2012.
- 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
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