Working Papers, Department of Economics, Lund University
Growth Forecasts, Belief Manipulation and Capital Markets
() and Patrick Leoni
Abstract: We analyze how a benevolent, privately-informed government
agency would optimally release information about the economy's growth rate
when the agents hold heterogeneous beliefs. We model two types of agents:
"trusting" and "distrustful." The former has a prior that is identical to
that of the government agency, whereas the latter has a prior that differs
from that of the government agency. We identify both "revealing" and
"nonrevealing" equilibria and demonstrate that the "nonrevealing"
equilibria can dominate the "revealing" equilibria in terms of ex-post
Keywords: Social welfare; information; forecasting; asset pricing; heterogeneous beliefs; (follow links to similar papers)
JEL-Codes: D83; G11; G12; (follow links to similar papers)
39 pages, July 31, 2010, Revised May 30, 2012
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