Interpreting How Others Interpret It: Social Value of Public Information
This paper studies the social value of public information in environments without common knowledge of data-generating process. We show that the stronger is the coordination motive behind agents behaviour, the more they would like to interpret private or public signals in the way that they suspect others are doing it. Consequently, the negative impact of public communication noted by Morris and Shin (2004) can be amplified if agents have doubts whether others take the public signal too literally and/or are too inattentive to their private signals. The social welfare increases when each agent evaluates the precision of public signal correctly but believes that others did not understand the public signal at all, which suggests that there is a scope for the central bank to “obliterate” its communication in a specific way, by making it, e.g., sophisticated and technical.
|Date of creation:||2012|
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- Carlo Rosa & Giovanni Verga, 2008. "The Impact of Central Bank Announcements on Asset Prices in Real Time," International Journal of Central Banking, International Journal of Central Banking, vol. 4(2), pages 175-217, June.
- 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.
- Lahiri, Kajal & Sheng, Xuguang, 2008. "Evolution of forecast disagreement in a Bayesian learning model," Journal of Econometrics, Elsevier, vol. 144(2), pages 325-340, June.
- Itzhak Ben-David & John R. Graham, 2013.
The Quarterly Journal of Economics,
Oxford University Press, vol. 128(4), pages 1547-1584.
- Ben-David, Itzhak & Graham, John R. & Harvey, Campbell R., 2010. "Managerial Miscalibration," Working Paper Series 2010-12, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Itzhak Ben-David & John R. Graham & Campbell R. Harvey, 2010. "Managerial Miscalibration," NBER Working Papers 16215, National Bureau of Economic Research, Inc.
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