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Information Aggregation and Policy

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  • Laurence Weiss

Abstract

The function of monetary policy to alter the informational content of money price signals is examined in a model where traders can observe an economy wide financial signal and a local commodity price. Under a passive policy, money demand disturbances, which are not directly observable, are shown to be confused with real productivity shocks and thereby preclude prices from fully reflecting all information. Even when the policy authority has no informational advantage, prospective money growth feedback rules can "improve" the structure of available information.

Suggested Citation

  • Laurence Weiss, 1982. "Information Aggregation and Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(1), pages 31-42.
    • Handle: RePEc:oup:restud:v:49:y:1982:i:1:p:31-42.
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    File URL: http://hdl.handle.net/10.2307/2297138
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    Citations

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    Cited by:

    1. Alexandre Kohlhas, 2015. "Learning-by-Sharing: Monetary Policy and the Information Content of Public Signals," 2015 Meeting Papers 57, Society for Economic Dynamics.
    2. Benassy, Jean-Pascal, 2001. "On the optimality of activist policies with a less informed government," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 45-59, February.
    3. Saleem Bahaj & Angus Foulis, 2017. "Macroprodential Policy under Uncertainty," International Journal of Central Banking, International Journal of Central Banking, vol. 13(3), pages 119-154, September.
    4. Kohlhas, Alexandre N., 2020. "An informational rationale for action over disclosure," Journal of Economic Theory, Elsevier, vol. 187(C).
    5. Glick, Reuven & Kretzmer, Peter & Wihlborg, Clas, 1995. "Real exchange rate effects of monetary disturbances under different degrees of exchange rate flexibility: An empirical analysis," Journal of International Economics, Elsevier, vol. 38(3-4), pages 249-273, May.
    6. Laurence Weiss, 1981. "Interest Rate Policies and Informational Efficiency," Cowles Foundation Discussion Papers 589, Cowles Foundation for Research in Economics, Yale University.

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