Advanced Search
MyIDEAS: Login

Transparency of Information and Coordination in Economies with Investment Complementarities

Contents:

Author Info

  • George-Marios Angeletos
  • Alessandro Pavan

Abstract

How do public and private information affect equilibrium allocations and social welfare in economies with investment complementarities? And what is the optimal transparency in the information conveyed, for example, by economic statistics, policy announcements, or news in the media? We first consider an environment where the complementarities are weak so that the equilibrium is unique no matter the structure of information. An increase in the precision of public information may have the perverse effect of increasing aggregate volatility. Nevertheless, as long as there is no value to lotteries, welfare unambiguously increases with an increase in either the relative or the absolute precision of public information. Hence, full transparency is optimal. This is because more transparency facilitates more effective coordination, which is valuable from a social perspective. On the other hand, when complementarities are strong enough that multiple equilibria are possible, more transparency permits the market to coordinate more effectively on either the bad or the good equilibrium. In this case, constructive ambiguity becomes optimal if there is a high risk that more transparency will lead to coordination failures.

Download Info

If 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.
File URL: http://www.nber.org/papers/w10391.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10391.

as in new window
Length:
Date of creation: Mar 2004
Date of revision:
Publication status: published as Angeletos, George-Marios and Alessandro Pavan. "Transparency Of Information And Coordination In Economies With Investment Complementarities," American Economic Review, 2004, v94(2,May), 91-98.
Handle: RePEc:nbr:nberwo:10391

Note: EFG
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. George-Marios Angeletos & Alessandro Pavan, 2004. "Transparency of Information and Coordination in Economies with Investment Complementarities," NBER Working Papers 10391, National Bureau of Economic Research, Inc.
  2. Benhabib, J. & Farmer, R.E.A, 1991. "Indeterminacy and Increasing Returns," Papers 165, Cambridge - Risk, Information & Quantity Signals.
  3. Andrew Atkeson & Patrick J. Kehoe, 2001. "The Advantage of Transparent Instruments of Monetary Policy," NBER Working Papers 8681, National Bureau of Economic Research, Inc.
  4. Daron Acemoglu, 1992. "Learning about Others Actions and the Investment Accelerator," CEP Discussion Papers dp0072, Centre for Economic Performance, LSE.
  5. Michael Woodford, 2001. "Imperfect Common Knowledge and the Effects of Monetary Policy," NBER Working Papers 8673, National Bureau of Economic Research, Inc.
  6. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2003. "Coordination and Policy Traps," NBER Working Papers 9767, National Bureau of Economic Research, Inc.
  7. Canzoneri, Matthew B, 1985. "Monetary Policy Games and the Role of Private Information," American Economic Review, American Economic Association, vol. 75(5), pages 1056-70, December.
  8. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
  9. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  10. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
  11. Bryant, John, 1983. "A Simple Rational Expectations Keynes-Type Model," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 525-28, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:10391. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

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.