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Financial fragility and information design

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  • Fan, Zhongjie
  • Tang, Dunzhe

Abstract

Financial fragility as a macro market attribute directly affects participants’ micro decisions. We study how government can achieve market prosperity through selectively inform participants on economy state. We find that government’s optimal information design is correlated with financial contagion and risk-sharing.

Suggested Citation

  • Fan, Zhongjie & Tang, Dunzhe, 2023. "Financial fragility and information design," Economics Letters, Elsevier, vol. 232(C).
    • Handle: RePEc:eee:ecolet:v:232:y:2023:i:c:s0165176523003816
    DOI: 10.1016/j.econlet.2023.111356
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    References listed on IDEAS

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    1. Dirk Bergemann & Stephen Morris, 2019. "Information Design: A Unified Perspective," Journal of Economic Literature, American Economic Association, vol. 57(1), pages 44-95, March.
    2. Daron Acemoglu & Asuman Ozdaglar & Alireza Tahbaz-Salehi, 2015. "Systemic Risk and Stability in Financial Networks," American Economic Review, American Economic Association, vol. 105(2), pages 564-608, February.
    3. Franklin Allen & Douglas Gale, 2000. "Financial Contagion," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 1-33, February.
    4. Emir Kamenica, 2019. "Bayesian Persuasion and Information Design," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 249-272, August.
    5. Ibragimov, Rustam & Jaffee, Dwight & Walden, Johan, 2011. "Diversification disasters," Journal of Financial Economics, Elsevier, vol. 99(2), pages 333-348, February.
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    Cited by:

    1. Gao, Yang & Zhou, Yueyi & Zhao, Longfeng, 2024. "Quantile interdependence and network connectedness between China's green financial and energy markets," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1148-1177.

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    More about this item

    Keywords

    Financial fragility; Information design;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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