IDEAS home Printed from https://ideas.repec.org/p/igi/igierp/543.html
   My bibliography  Save this paper

Real Rigidity, Nominal Rigidity, and the Social Value of Information

Author

Listed:
  • George-Marios Angeletos
  • Luigi Iovino
  • Jennifer La'o

Abstract

Does welfare improve when ?firms are better informed about the state of the economy and can better coordinate their decisions? We address this question in an elementary business-cycle model that highlights how the dispersion of information can be the source of both nominal and real rigidity. Within this context we develop a taxonomy for how the social value of information depends on the two rigidities, on the sources of the business cycle, and on the conduct of monetary policy. JEL codes: C7, D6, D8. Keywords: Fluctuations, informational frictions, strategic complementarity, coordination, beauty contests, central-bank transparency.

Suggested Citation

  • George-Marios Angeletos & Luigi Iovino & Jennifer La'o, 2015. "Real Rigidity, Nominal Rigidity, and the Social Value of Information," Working Papers 543, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    • Handle: RePEc:igi:igierp:543
    as

    Download full text from publisher

    File URL: https://repec.unibocconi.it/igier/igi/wp/2015/543.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dirk Bergemann & Stephen Morris, 2013. "Robust Predictions in Games With Incomplete Information," Econometrica, Econometric Society, vol. 81(4), pages 1251-1308, July.
    2. Manuel Amador & Pierre-Olivier Weill, 2010. "Learning from Prices: Public Communication and Welfare," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 866-907.
    3. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1295-1328.
    4. Bartosz Mackowiak & Mirko Wiederholt, 2009. "Optimal Sticky Prices under Rational Inattention," American Economic Review, American Economic Association, vol. 99(3), pages 769-803, June.
    5. Guido Lorenzoni, 2010. "Optimal Monetary Policy with Uncertain Fundamentals and Dispersed Information ," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(1), pages 305-338.
    6. Mr. Mauro F Roca, 2010. "Transparency and Monetary Policy with Imperfect Common Knowledge," IMF Working Papers 2010/091, International Monetary Fund.
    7. Baeriswyl, Romain & Cornand, Camille, 2010. "The signaling role of policy actions," Journal of Monetary Economics, Elsevier, vol. 57(6), pages 682-695, September.
    8. Jordi Galí, 2008. "Introduction to Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework," Introductory Chapters, in: Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton University Press.
    9. repec:cwl:cwldpp:1821rrr is not listed on IDEAS
    10. Stephen Morris & Hyun Song Shin & Hui Tong, 2006. "Social Value of Public Information: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con: Reply," American Economic Review, American Economic Association, vol. 96(1), pages 453-455, March.
    11. Carl E. Walsh, 2007. "Optimal Economic Transparency," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 5-36, March.
    12. Lars E. O. Svensson, 2006. "Social Value of Public Information: Comment: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con," American Economic Review, American Economic Association, vol. 96(1), pages 448-452, March.
    13. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
    14. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Angeletos, G.-M. & Lian, C., 2016. "Incomplete Information in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1065-1240, Elsevier.
    2. Kohlhas, Alexandre N., 2020. "An informational rationale for action over disclosure," Journal of Economic Theory, Elsevier, vol. 187(C).
    3. Luigi Iovino & Jennifer La'O & George-Marios Angeletos, 2015. "The Social Value of Information in a Business-Cycle Model," 2015 Meeting Papers 1299, Society for Economic Dynamics.
    4. Iovino, Luigi & La’O, Jennifer & Mascarenhas, Rui, 2022. "Optimal monetary policy and disclosure with an informationally-constrained central banker," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 151-172.
    5. Stephanie L. Chan, 2021. "The Social Value of Public Information When Not Everyone is Privately Informed," Working Papers 2021-09-18, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    6. Candian, Giacomo, 2021. "Central bank transparency, exchange rates, and demand imbalances," Journal of Monetary Economics, Elsevier, vol. 119(C), pages 90-107.
    7. Luca Colombo & Gianluca Femminis & Alessandro Pavan, 2014. "Information Acquisition and Welfare," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(4), pages 1438-1483.
    8. Ricardo Reis, 2011. "When Should Policymakers Make Announcements?," 2011 Meeting Papers 122, Society for Economic Dynamics.
    9. George-Marios Angeletos & Chen Lian, 2016. "Incomplete Information in Macroeconomics: Accommodating Frictions in Coordination," NBER Working Papers 22297, National Bureau of Economic Research, Inc.
    10. Gaetano Gaballo, 2016. "Rational Inattention to News: The Perils of Forward Guidance," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(1), pages 42-97, January.
    11. Angeletos, George-Marios & Iovino, Luigi & La'O, Jennifer, 2020. "Learning over the business cycle: Policy implications," Journal of Economic Theory, Elsevier, vol. 190(C).
    12. Jean-Paul L'Huillier & William R. Zame, 2015. "The Flattening of the Phillips Curve and the Learning Problem of the Central Bank," EIEF Working Papers Series 1503, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2014.
    13. Ryan A Chahrour, 2011. "Transparency and Costly Information Acquisition," 2011 Meeting Papers 1221, Society for Economic Dynamics.
    14. George-Marios Angeletos & Chen Lian, 2018. "Forward Guidance without Common Knowledge," American Economic Review, American Economic Association, vol. 108(9), pages 2477-2512, September.
    15. Jonathan G James & Phillip Lawler, 2017. "Optimal Transparency and Policy Intervention with Heterogeneous Signals and Information Stickiness," Manchester School, University of Manchester, vol. 85(5), pages 577-600, September.
    16. van der Cruijsen, Carin A.B. & Eijffinger, Sylvester C.W. & Hoogduin, Lex H., 2010. "Optimal central bank transparency," Journal of International Money and Finance, Elsevier, vol. 29(8), pages 1482-1507, December.
    17. Ippei Fujiwara & Yuichiro Waki, 2015. "Private news and monetary policy forward guidance or (the expected virtue of ignorance)," Globalization Institute Working Papers 238, Federal Reserve Bank of Dallas.
    18. Ryan Chahrour, 2014. "Public Communication and Information Acquisition," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(3), pages 73-101, July.
    19. Kenza Benhima & Isabella Blengini, 2020. "Optimal Monetary Policy when Information is Market-Generated," The Economic Journal, Royal Economic Society, vol. 130(628), pages 956-975.
    20. Mäkinen, Taneli & Ohl, Björn, 2015. "Information acquisition and learning from prices over the business cycle," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 585-633.

    More about this item

    Keywords

    fluctuations; informational frictions; strategic complementarity; coordination; beauty contests; central-bank transparency.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:igi:igierp:543. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: http://www.igier.unibocconi.it/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.