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Optimal Degree of Public Information Dissemination

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Author Info
Camille Cornand (Financial Market Group, London School of Economics and Political Sciences Houghton Street, London WC2A 2AE, United-Kingdom, C.Cornand@lse.ac.uk)
Frank Heinemann (Technische Universität Berlin, Sekretariat H 52 Strasse des 17. Juni 135, 10623 Berlin f.heinemann@ww.tu-berlin.de)

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Abstract

Financial markets and macroeconomic environments are often characterized by positive externalities. In these environments, transparency may reduce expected welfare from an ex-ante point of view: public announcements serve as a focal point for higher-order beliefs and affect agents’ behaviour more than justified by their informational contents. Some scholars conclude that it might be better to reduce the precision of public signals or entirely withhold information. This paper shows that public information should always be provided with maximum precision, but under certain conditions not to all agents. Restricting the degree of publicity is a better-suited instrument for preventing the negative welfare effects of public announcements than restrictions on their precision are.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 158.

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Date of creation: Feb 2006
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Handle: RePEc:trf:wpaper:158

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Related research
Keywords: Transparency; public information; private information; coordination; strategic complementarity;

Other versions of this item:

Find related papers by JEL classification:
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
F31 - International Economics - - International Finance - - - Foreign Exchange

This paper has been announced in the following NEP Reports:

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.:
  1. Hellwig, Christian, 2002. "Public Information, Private Information, and the Multiplicity of Equilibria in Coordination Games," Journal of Economic Theory, Elsevier, vol. 107(2), pages 191-222, December. [Downloadable!] (restricted)
  2. Jeffery D. Amato & Stephen Morris & Hyun Song Shin, 2002. "Communication and Monetary Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 18(4), pages 495-503.
    Other versions:
  3. Heinemann, Frank & Illing, Gerhard, 2002. "Speculative attacks: unique equilibrium and transparency," Journal of International Economics, Elsevier, vol. 58(2), pages 429-450, December. [Downloadable!] (restricted)
  4. Jon Faust & Lars E.O. Svensson, 1998. "Transparency and credibility: monetary policy with unobservable goals," International Finance Discussion Papers 605, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  5. Morris, S & Song Shin, H, 1996. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," Economics Papers 126, Economics Group, Nuffield College, University of Oxford.
    Other versions:
  6. Geore-Marios Angeletos & Alessandro Pavan, 2004. "Transparency of Information and Coordination in Economies with Investment Complementarities," Levine's Bibliography 122247000000000289, UCLA Department of Economics. [Downloadable!]
    Other versions:
  7. Michael Woodford, 2005. "Central-bank communication and policy effectiveness," Discussion Papers 0506-07, Columbia University, Department of Economics. [Downloadable!]
    Other versions:
  8. Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2004. "The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information," Econometrica, Econometric Society, vol. 72(5), pages 1583-1599, 09. [Downloadable!] (restricted)
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  10. Christina D. Romer & David H. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June. [Downloadable!] (restricted)
  11. Camille Cornand, 2004. "Speculative Attack and Informational Structure: An Experimental Study," Post-Print halshs-00180118_v1, HAL. [Downloadable!]
  12. Frederic S. Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," NBER Working Papers 10829, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December. [Downloadable!] (restricted)
  14. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April. [Downloadable!] (restricted)
  15. Rosemarie Nagel & Antonio Cabrales & Roc Armenter, 2002. "Equilibrium Selection through Incomplete Information in Coordination Games: An Experimental Study," Economics Working Papers 601, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  16. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December. [Downloadable!]
  17. Stephen Morris & Hyun Song Shin, 1998. "A Theory of the Onset of Currency Attacks," Cowles Foundation Discussion Papers 1204, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  18. Carl E. Walsh, 2006. "Transparency, Flexibility, and Inflation Targeting," Working Papers Central Bank of Chile 401, Central Bank of Chile. [Downloadable!]
  19. Monderer, Dov & Samet, Dov, 1989. "Approximating common knowledge with common beliefs," Games and Economic Behavior, Elsevier, vol. 1(2), pages 170-190, June. [Downloadable!] (restricted)
  20. Cukierman, A., 2000. "Accountability, Credibility, Transparency and Stabilization Policy in the Eurosystem," Papers 2000-4, Tel Aviv.
  21. Bernhard Winkler, 2000. "Which kind of transparency? On the need for clarity in monetary policy-making," Working Paper Series 26, European Central Bank. [Downloadable!]
  22. Christina E. Bannier & Frank Heinemann, 2005. "Optimal Transparency and Risk-Taking to Avoid Currency Crises," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(3), pages 374-, September.
  23. Stephen Morris & Hyun Song Shin, 2005. "Central Bank Transparency and the Signal Value of Prices," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(2005-2), pages 1-66. [Downloadable!]
  24. Christian Hellwig, 2002. "Public Announcements, Adjustment Delays, and the Business Cycle (November 2002)," UCLA Economics Online Papers 208, UCLA Department of Economics. [Downloadable!]
  25. Camille Cornand, 2004. "Speculative Attack and Informational Structure: An Experimental Study," Working Papers 0407, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
  26. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Carl E. Walsh, 2006. "Transparency, Flexibility, and Inflation Targeting," Working Papers Central Bank of Chile 401, Central Bank of Chile. [Downloadable!]
  2. Jean-Pierre Allegret & Camille Cornand, 2005. "The Pros and Cons of Higher Transparency: The Case of Speculative Attacks," Working Papers 0502, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
  3. Marc-Andreas Muendler, 2005. "The Action Value of Information and the Natural Transparency Limit¤," University of California at San Diego, Economics Working Paper Series 2005-09, Department of Economics, UC San Diego. [Downloadable!]
  4. Carl E. Walsh, 2007. "Optimal Economic Transparency," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 5-36, March. [Downloadable!]
  5. David P. Myatt & Chris Wallace, 2008. "On the Sources and Value of Information: Public Announcements and Macroeconomic Performance," Economics Series Working Papers 411, University of Oxford, Department of Economics. [Downloadable!]
  6. Lars E. O. Svensson, 2006. "Social Value of Public Information: Comment: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con," American Economic Review, American Economic Association, vol. 96(1), pages 448-452, March. [Downloadable!]
  7. Carl E. Walsh, 2008. "Announcements and the role of policy guidance," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 421-442. [Downloadable!]
  8. Amihai Glazer, 2008. "Crowding Out Wasteful Activities by Wasteful Activities," Working Papers 080908, University of California-Irvine, Department of Economics. [Downloadable!]
  9. Marek Rozkrut, 2008. "It’s not only WHAT is said, it’s also WHO the speaker is. Evaluating the effectiveness of central bank communication," National Bank of Poland Working Papers 47, National Bank of Poland, Economic Institute. [Downloadable!]
  10. George-Marios Angeletos & Alessandro Pavan, 2007. "Policy with Dispersed Information," NBER Working Papers 13590, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Eijffinger, Sylvester C W & van der Cruijsen, Carin A B, 2007. "The Economic Impact of Central Bank Transparency: A Survey," CEPR Discussion Papers 6070, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. Baeriswyl, Romain, 2007. "Central Bank's Action and Communication," Discussion Papers in Economics 1381, University of Munich, Department of Economics. [Downloadable!]
  13. Huang, Weiting, 2009. "作为人力资本的语言：专业化、组织沟通与语言习得
    [Language as Human Capital: Labor Specialization, Organizational Communication and Language Acquisition]    ," MPRA Paper 15677, University Library of Munich, Germany. [Downloadable!]
  14. Stephen Morris & Hyun Song Shin, 2006. "Optimal Communication," Levine's Bibliography 321307000000000236, UCLA Department of Economics. [Downloadable!]
    Other versions:
  15. Hellwig, Christian & Veldkamp, Laura, 2007. "Knowing What Others Know: Coordination Motives in Information Acquisition," CEPR Discussion Papers 6506, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  16. George-Marios Angeletos & Alessandro Pavan, 2005. "Efficiency and Welfare with Complementarities and Asymmetric Information," NBER Working Papers 11826, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Jean-Marc Tallon, 2006. "Incertitude stratégique et sélection d'équilibre : deux applications," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00177058_v1, HAL. [Downloadable!]
  18. George-Marios Angeletos & Guido Lorenzoni & Alessandro Pavan, 2007. "Wall Street and Silicon Valley: A Delicate Interaction," NBER Working Papers 13475, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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