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American Economic Review: Vol. 101 No. 4 (June 2011)

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Optimal Policy Intervention and the Social Value of Public Information

Article Citation

James, Jonathan G., and Phillip Lawler. 2011. "Optimal Policy Intervention and the Social Value of Public Information." American Economic Review, 101(4): 1561-74.

DOI: 10.1257/aer.101.4.1561

Abstract

Svensson (2006) argues that Morris and Shin (2002) is, contrary to what is claimed, pro-transparency. This paper reexamines the issue but with an important modification to the original Morris and Shin framework. Recognizing that central banks impact the economy not only indirectly via public announcements, but also directly through policy actions, we consider the social value of public information in the presence of active policy intervention. Our results strengthen Morris and Shin's conclusions considerably: in particular, we find that public disclosure of the central bank's information is unambiguously, i.e., regardless of parameter values, undesirable. (JEL D82, D83, E52, E58)

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Authors

James, Jonathan G. (Swansea U)
Lawler, Phillip (Swansea U)

JEL Classifications

D82: Asymmetric and Private Information
D83: Search; Learning; Information and Knowledge; Communication; Belief
E52: Monetary Policy
E58: Central Banks and Their Policies


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