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The Short-Run Effects of Unanticipated Monetary Shocks under Distinct Trading Mechanisms

Author

Listed:
  • Luis Araujo

    (Michigan State University and Sao Paulo School of Economics - FGV)

  • Andrei Shevchenko

    (Michigan State University)

Abstract

We unveil the existence of a trade-off between efficiency and information transmission in a decentralized economy subject to a monetary shock. If the objective is to maximize information transmission, then the optimal trading protocol is inherently inefficient. If, instead, the objective is to maximize efficiency, then the optimal trading protocol is necessarily uninformative.

Suggested Citation

  • Luis Araujo & Andrei Shevchenko, 2018. "The Short-Run Effects of Unanticipated Monetary Shocks under Distinct Trading Mechanisms," Russian Journal of Money and Finance, Bank of Russia, vol. 77(3), pages 76-88, September.
    • Handle: RePEc:bkr:journl:v:77:y:2018:i:3:p:76-88
    DOI: 10.31477/rjmf.201803.76
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    More about this item

    Keywords

    monetary uncertainty; search; information transmission; trading protocols;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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