Optimal dynamic public communication
This paper builds a dynamic model of the information flow between partially informed financial institutions and a public agency. The financial institutions decide how to allocate their portfolio between a risk-free technology with a known payoff and a risky technology whose payoff is unknown. The public agency learns about the value of the unknown payoff by observing with measurement error the actions of the financial institutions and decides whether to communicate the information at the agency's disposal. The paper characterizes the optimal public communication plan and shows that full transparency (taken as the release of information whenever it is collected) is not always optimal. Instead, optimal plans involve delayed communication, the amount of delay depending on the precision of private information and the size of the agency's measurement error. The explanation of the result lies in the collection process of public information: while releasing information improves the welfare of the agents, it also decreases the informational content of their actions, hampering the agency's learning and reducing the benefits of future public communication.
|Date of creation:||Feb 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Via Nazionale, 91 - 00184 Roma|
Web page: http://www.bancaditalia.it
More information through EDIRC
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.:
- Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
- Sandra Gomes & Pascal Jacquinot & Matthias Mohr & Massimiliano Pisani, 2011.
"Structural reforms and macroeconomic performance in the euro area countries: a model-based assessment,"
Temi di discussione (Economic working papers)
830, Bank of Italy, Economic Research and International Relations Area.
- Sandra Gomes & Pascal Jacquinot & Matthias Mohr & Massimiliano Pisani, 2013. "Structural Reforms and Macroeconomic Performance in the Euro Area Countries: A Model-Based Assessment," International Finance, Wiley Blackwell, vol. 16(1), pages 23-44, 02.
- Sandra Gomes & P. Jacquinot & M. Mohr & M. Pisani, 2011. "Structural reforms and macroeconomic performance in the euro area countries: a model-based assessment," Working Papers w201113, Banco de Portugal, Economics and Research Department.
- Gomes, Sandra & Jacquinot, Pascal & Mohr, Matthias & Pisani, Massimiliano, 2011. "Structural reforms and macroeconomic performance in the euro area countries: a model-based assessment," Working Paper Series 1323, European Central Bank.
- Pierre Gosselin & Aileen Lotz & Charles Wyplosz, 2008. "The Expected Interest Rate Path: Alignment of Expectations vs. Creative Opacity," International Journal of Central Banking, International Journal of Central Banking, vol. 4(3), pages 145-185, September.
- Amador, Manuel & Weill, Pierre-Olivier, 2006. "Learning from Private and Public Observation of Other's Actions," MPRA Paper 109, University Library of Munich, Germany.
- Burguet, R. & Vives, X., 1996.
"Social Learning and Costly Information Acquisition,"
UFAE and IAE Working Papers
323.96, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Roberto Burguet & Xavier Vives, 2000. "Social learning and costly information acquisition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(1), pages 185-205.
- Xavier Vives, 1993.
"How Fast do Rational Agents Learn?,"
Review of Economic Studies,
Oxford University Press, vol. 60(2), pages 329-347.
- Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521824019, june. pag.
- Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521530927, june. pag.
When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_856_12. 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 references are entirely missing, you can add them using this form.