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Growth Forecasts, Belief Manipulation and Capital Markets

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  • Lundtofte, Frederik

    (Department of Economics and Knut Wicksell Centre for Financial Studies, Lund University)

  • Leoni, Patrick

    (Kedge Business School)

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.

Suggested Citation

  • Lundtofte, Frederik & Leoni, Patrick, 2013. "Growth Forecasts, Belief Manipulation and Capital Markets," Knut Wicksell Working Paper Series 2013/15, Lund University, Knut Wicksell Centre for Financial Studies.
    • Handle: RePEc:hhs:luwick:2013_015
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    References listed on IDEAS

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    1. Joan Paredes & Javier J. Pérez & Gabriel Perez Quiros, 2023. "Fiscal targets. A guide to forecasters?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(4), pages 472-492, June.

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    More about this item

    Keywords

    Social welfare; information; forecasting; asset pricing; heterogeneous beliefs;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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