Knut Wicksell Working Paper Series, Knut Wicksell Centre for Financial Studies, 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 agent:
"conforming" and "dissenting." 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 informative and
uninformative equilibria and demonstrate that the uninformative equilibria
can dominate the informative ones in terms of ex-post social welfare.
Keywords: Social welfare; information; forecasting; asset pricing; heterogeneous beliefs; (follow links to similar papers)
JEL-Codes: D83; G11; G12; (follow links to similar papers)
45 pages, September 13, 2013
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