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On the Sources and Value of Information: Public Announcements and Macroeconomic Performance

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Author Info

  • David P. Myatt
  • Chris Wallace

Abstract

In the context of macroeconomic coordination, studies of the social value of information distinguish sharply between private and public information.� However, no information is truly public (that is, common knowledge) or private in the established sense.� This paper develops a general approach by allowing for many informative signals each of which incorporates elements of both public and private information.� A measure of relative publicity determines a signal's equilibrium use and its social value.� Output gaps (and hence social losses) arise when signals differ in their publicity: such differences drive a wedge between price-formation and expectations-formation processes.� Turning to the effect of public announcements, and contrary to previous results, it is never socially optimal to withhold information completely, nor is it optimal to release perfectly public (or, indeed, perfectly private) information.� Instead, when perfect communication is feasible, limited clarity enhances macroeconomic performance.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 411.

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Date of creation: 01 Oct 2008
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Handle: RePEc:oxf:wpaper:411

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Related research

Keywords: Beauty Contests; Island Economies; Coordination; Public and Private Signals; Public Announcements;

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References

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Citations

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Cited by:
  1. Venky Venkateswaran & Luis Llosa, 2012. "Efficiency With Endogenous Information Choice," 2012 Meeting Papers 660, Society for Economic Dynamics.
  2. Martimort, David & Stole, Lars, 2011. "Aggregate Representations of Aggregate Games," MPRA Paper 32871, University Library of Munich, Germany.
  3. Camille Cornand & Franck Heinemann, 2013. "Measuring Agents’ Reaction to Private and Public Information in Games with Strategic Complementarities," Working Papers 1341, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  4. Alia Gizatulina, 2012. "Interpreting How Others Interpret It: Social Value of Public Information," CESifo Working Paper Series 3787, CESifo Group Munich.
  5. Camille Cornand & Frank Heinemann, 2010. "Measuring Agents' Reaction to Private and Public Information in Games with Strategic Complementarities," CESifo Working Paper Series 2947, CESifo Group Munich.
  6. Camille Cornand & Frank Heinemann, 2013. "Limited higher order beliefs and the welfare effects of public information," Working Papers 1324, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  7. George-Marios Angeletos & Luigi Iovino & Jennifer La'O, 2011. "Cycles, Gaps, and the Social Value of Information," Levine's Working Paper Archive 786969000000000293, David K. Levine.
  8. Luca Colombo & Gianluca Femminis & Alessandro Pavan, 2012. "Information Acquisition and Welfare," Discussion Papers 1554, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Alia Gizatulina, 2013. "Wondering How Others Interpret It: Social Value of Public Information," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2013_08, Max Planck Institute for Research on Collective Goods.
  10. Martimort, David & Stole, Lars, 2011. "The Collective Wisdom of Beauty Contests," MPRA Paper 32872, University Library of Munich, Germany.

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